Greenspan: No sensible policy could have prevented the housing bubble.This seems to be false. Maybe raising interest rates would not have done anything, but what about issuing a statement saying "It looks like there may be a housing bubble; stay away from mortgage derivatives."
Update: Mark Thoma agrees (or "also holds this opinion" . . . I haven't talked to him obviously)
Regulation is certainly one means the Fed had to that end, but Fed communication could have helped too. If Greenspan had, for example, told people to stay away from mortgages because they were toxic rather than implicitly encouraging them to invest in housing, things might have been different.
Posts
No comments:
Post a Comment