People can fully choose where to keep their money. I had my life savings in Treasuries for years at crap rates-to a point where I was struggling to make ends meet even with 3/4's of a million packed away.
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Alan Greenspan: "The Fed Didn't Cause the Housing Bubble"
- Thread starter Daal
- Start date
People can fully choose where to keep their money. I had my life savings in Treasuries for years at crap rates-to a point where I was struggling to make ends meet even with 3/4's of a million packed away.
Statement of Christopher J. Dodd
U.S. Senate Committee on Banking, Housing, and Urban Affairs
"Mortgage Market Turmoil: Causes and Consequences"
March, 22 2007
".....in February of 2004 the leadership of the Federal Reserve Board seemed to encourage the development and use of adjustable rate mortgages that, today, are defaulting and going into foreclosure at record rates. The then-Chairman of the Fed said, in a speech to the National Credit Union Administration, said:
âAmerican consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage.â
Shortly thereafter, the Fed went on a series of 17 interest rate hikes in a row, taking the fed funds rate from 1% to 5.25%.
So, in sum: By the Spring of 2004, the regulators had started to document the fact that lending standards were easing. At the same time, the Fed was encouraging lenders to develop and market alternative adjustable rate products, just as it was embarking on a long series of hikes in short term rates. In my view, these actions set the conditions for the perfect storm that is sweeping over millions of American homeowners today.
U.S. Senate Committee on Banking, Housing, and Urban Affairs
"Mortgage Market Turmoil: Causes and Consequences"
March, 22 2007
".....in February of 2004 the leadership of the Federal Reserve Board seemed to encourage the development and use of adjustable rate mortgages that, today, are defaulting and going into foreclosure at record rates. The then-Chairman of the Fed said, in a speech to the National Credit Union Administration, said:
âAmerican consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage.â
Shortly thereafter, the Fed went on a series of 17 interest rate hikes in a row, taking the fed funds rate from 1% to 5.25%.
So, in sum: By the Spring of 2004, the regulators had started to document the fact that lending standards were easing. At the same time, the Fed was encouraging lenders to develop and market alternative adjustable rate products, just as it was embarking on a long series of hikes in short term rates. In my view, these actions set the conditions for the perfect storm that is sweeping over millions of American homeowners today.
Thats why I say fed bashing is a religion. It doesn't matter what evidence you present people wont change their minds. We had a global real estate bubble and people want to blame overnight loans between US banks. 'Fed Credit' is not the answer, you can find plenty of periods where fed credit was growing a lot and it didnt produce real estate bubbles.
Low fed funds IS to blame for part of the subprime crisis/alt-a because a good chunk of that had teaser rates that were priced off short-term interest rates, so 1% rates probably blew the bubble bigger than otherwise would. But the bulk of US mortgages are fixed rates and the bubble would have happened anyway
Low fed funds IS to blame for part of the subprime crisis/alt-a because a good chunk of that had teaser rates that were priced off short-term interest rates, so 1% rates probably blew the bubble bigger than otherwise would. But the bulk of US mortgages are fixed rates and the bubble would have happened anyway
as i said before, it was loose credit not low interest rates that cause the bubble.
right now, mortgage rates are near an all-time low so why isn't there a massive bubble?? why is real estate deflating at an unprecedented rate? duh! because credit is tight!
why wasn't there a massive bubble when rates were low from 1950 to 1964?? duh! because banks weren't lending to any jackass with 5% down.
right now, mortgage rates are near an all-time low so why isn't there a massive bubble?? why is real estate deflating at an unprecedented rate? duh! because credit is tight!
why wasn't there a massive bubble when rates were low from 1950 to 1964?? duh! because banks weren't lending to any jackass with 5% down.
Bravo to the card counter.....
Quote from blackjack007:
as i said before, it was loose credit not low interest rates that cause the bubble.
right now, mortgage rates are near an all-time low so why isn't there a massive bubble?? why is real estate deflating at an unprecedented rate? duh! because credit is tight!
why wasn't there a massive bubble when rates were low from 1950 to 1964?? duh! because banks weren't lending to any jackass with 5% down.
I think we misunderstood here. When people said Greenspan was responsible, not for the entire mistake, but rather a warning missed given so he was somehow reponsible a portion of it, meaning that he, as someone sitting on the top of knowledge in this domain and the power he has, should give some warning to the general public about the bubble that might have to come and its consequences. But he didn't, he just said "I don't think it's a bubble", "It's normal" or something like that kind.
Trivia: You may expect the given answer will be the later as in this context, so I guess it's the former one but I don't have any data to support my answer. I could be wrong.
Trivia: You may expect the given answer will be the later as in this context, so I guess it's the former one but I don't have any data to support my answer. I could be wrong.
Quote from Pa(b)st Prime:
I hope you're kidding. I'm 48 and I've lived through the 50% stock break in 1970, the 50% break in 1974, the gold markets 75% implosion in 1980, Long Bond prices busting by 50% from 80-84, farm acreage breaking 75% in 1986, the '87 crash, L.A. real estate losing 42% in 90's, the Tech collapse and now this. So please tell me about "generational" experience.
Trivia: Which period saw bigger American stock market losses: 2000-2002 or 2007-2009?
The "crash" earlier in the decade was worse. Keep in mind the NASDAQ lost 82% and the S&P 50%. Also there isn't a person here whose home isn't worth more now-even post haircut-than it was in 2000.
I wasn't a Greenspan fan per se' but he RAISED rates something like 15 consecutive meetings before he retired. The deflationary fears in 2002 were misguided in retrospect but it wasn't evident. After all T-Bonds have been pricing in a recession for a decade. Bottom line there was too much liquidity-not just from the fed window but actual productivity gains too and money chases yield and appreciation by habit. EOD markets are like musical chairs. The music stops and someone loses their place in the game. It's always going to be that way. Hence ZERO SUM....
I wasn't a Greenspan fan per se' but he RAISED rates something like 15 consecutive meetings before he retired. The deflationary fears in 2002 were misguided in retrospect but it wasn't evident. After all T-Bonds have been pricing in a recession for a decade. Bottom line there was too much liquidity-not just from the fed window but actual productivity gains too and money chases yield and appreciation by habit. EOD markets are like musical chairs. The music stops and someone loses their place in the game. It's always going to be that way. Hence ZERO SUM....
Quote from eagle:
I think we misunderstood here. When people said Greenspan was responsible, not for the entire mistake, but rather a warning missed given so he was somehow reponsible a portion of it, meaning that he, as someone sitting on the top of knowledge in this domain and the power he has, should give some warning to the general public about the bubble that might have to come and its consequences. But he didn't, he just said "I don't think it's a bubble", "It's normal" or something like that kind.
Trivia: You may expect the answer will be the later as in this context, so I guess it's the former one but I don't have any data to support my answer. I could be wrong.
I'm playing Devils advocate. I put most of the blame on Greenspan.Quote from shadowtrader:
If lowering the fed funds rate has no effect why did he do it at the first sign of any trouble? Asian currency crisis, LTCM, Y2k, etc.
Even if you argue that the effects were just psychological, he knew that the market reaction would be mostly positive, though the economic situation didn't warrant it.
I would have to say to get credit flowing again, exactly what they are doing now.
Quote from blackjack007:
"... right now, mortgage rates are near an all-time low so why isn't there a massive bubble?? why is real estate deflating at an unprecedented rate? duh! because credit is tight!
Isn't it more that credit is "tight" for poorly qualified borrowers... as it should be and should have always been?
From what I hear if you're a qualified borrower, getting credit is not a problem now.