Quote from pepper_john:
Only one year after that he is now sounding alarms at ARM, IO, Optional ARM, etc, like craze.
The fact that he is the best story teller is evident in that so many people became fancinated by his fair tales, but he has to reverse them so often that these fair tales become nightmares.
The problem is one of almost Orwellian proportion. In this world of omnipresent Government/media, with it's televised Senate banking committee hearings and glasnost like Fed transparency, the Federal Reserve Chairman has been morphed into
The People's Minister of National Economist. Commenting on every global monetary implication, opining on the effects of Congressional fiscal policy, becoming the "go-to" guy on Social Security funding: all of these things have expanded the Chairman's role to a point where there's become a disconnect between the Fed's TRUE role and the expectation of a Nanny state "managed economy."
The traditional role of the Fed Board of Governors is simple yet VERY crucial. Preserve the viability, health, and integrity of the nation's banking system. Period. That's why I LMFAO when someone comes on ET posting how Greenspan is nothing more than a puppet of the banking system. Well.... it's
his frigging job!!
What
isn't his job or concern? For starters Fed policy can't be dependant on the greed or stupidity of consumers or investors. Think of how ridiculous the arm chair quarterbacking has become. Half the world thinks the tech bubble occurred because of accommodative rates in 1998-1999. The other half thinks the bubble burst because of
restrictive policy in 2000-2001. Let me clue the trading community into a dirty little secret. When you buy, someone else is selling. And unless you prefer trading in a ZERO volatility environment, SOMEONE is going to lose.
Greenspan has handled the monetary part of his job (his ONLY TRUE OBLIGATION) with aplomb. He eased in response to Asia/Russia/LTCM and mitigated what were UGLY stock declines in Octs 97 and 98. He WARNED of "irrational exuberance" while being open enough to recognize that changing productivity gains were helpful in supporting higher equity valuations. Keep in mind the market is STILL higher than it was when those eases began. In 2000 as the market came off it's highs he waited. He knew that a preemptive response to an emerging recession would be like putting out a fire with gasoline if liquidity injections came with the markets just off their highs. So instead by 2001 he orchestrated two years worth of DRAMATIC stimulus to bring the markets out of freefall. In the past year and a half as housing and stocks have risen appreciably he's tried to stabilize the situation by RAISING rates and at the same time keeping the all important long end of the Treasury yield curve at competitive spreads to Fed Funds.
Just because people
mis-time investments. Just because folks overborrow, is not a grave concern. Those events will ALWAYS happen. It's life. What I care about is knowing that my bank won't be on
Holiday with a sign on the door saying "Sorry we're closed due to lack of funds. Go call the FDIC."
