Greenspan Sees Bottom In Housing, Criticizes Bailout

Wall Street Journal ^ | August 14, 2008 | David Wessel

[djsherin]

WASHINGTON -- Alan Greenspan usually surrounds his opinions with caveats and convoluted clauses. But ask his view of the government's response to problems confronting mortgage giants Fannie Mae and Freddie Mac, and he offers one word: "Bad."

In a conversation this week, the former Federal Reserve chairman also said he expects that U.S. house prices, a key factor in the outlook for the economy and financial markets, will begin to stabilize in the first half of next year.

"Home prices in the U.S. are likely to start to stabilize or touch bottom sometime in the first half of 2009," he said in an interview. Tracing a jagged curve with his finger on a tabletop to underscore the difficulty in pinpointing the precise trough, he cautioned that even at a bottom, "prices could continue to drift lower through 2009 and beyond."

[djsherin]

He seems to make sense when he's out of the federal reserve.

[kcm.org]

Dr. Greenspan, the housing market crashed and oil shot up when which political party was allegedly elected into control of House and Senate???

[Perdogg]

I wish he would go away and enjoy retirement.

[PowderMonkey]

Former Federal Reserve chairmen, like former Presidents, should refrain from public commentary. They wield an inordinate amount of influence absent accountability. Under such conditions, comments more often are meant to influence rather than inform.

[bamagirl1944]

Why didn’t “Mr. Financial Genius” speak up before the bailout?

[paulcissa]

Greenspan needs a big ‘ol cup of STFU!

[M. Dodge Thomas]

"It's the imbalance of supply and demand which causes prices to go down, but it's ultimately the valuation process of the use of the commodity...which tells you where the bottom is," Mr. Greenspan said, recalling his days trading copper a half century ago. "For example, the grain markets can have a huge excess of corn or wheat, but the price never goes to zero. It'll stabilize at some level of prices where people are willing to hold the excess inventory. We have little history, but the same thing is surely true in housing as well. We will get to the point where there will be willing holders of vacant single-family dwellings, and that will no longer act to depress the price level."

I wonder if Mr. Greenspan has ever seen the inside of a vacant single family home after the heating fails or the wiring, plumbing, and HVAC gets pulled out of the walls?

[Always Right]

Why didn’t “Mr. Financial Genius” speak up before the bailout?

The better question is why didn't Greenspan do something about the loose credit that created the housing bubble while he was still employed.

[TChris]

I wonder if Mr. Greenspan has ever seen the inside of a vacant single family home after the heating fails or the wiring, plumbing, and HVAC gets pulled out of the walls?

What's your point? Does the potential deterioration of a house justify compelling taxpayers to pay for keeping the heat on?

[djsherin]

Probably because he benefitted in some way. He seems like a smart guy, but his statements and actions often seem at odds.

[LetsRok]

Where is this old coot getting his information to give this analysis???? He is spouting his opinion since he does not have access to the raw data.

[WaterBoard]

Factoid of the Day

The "Republican" Alan Greenspan is married uber-liberal NBC reporter and Obamaniac Andrea Mitchell.

[zek157]

I have thought the same thing every time he makes this type of statement. Greenspan speaks and the market reacts one way or another. He could be making a fortune on calls/puts depending on what he plans on saying.

[Moonman62]

Where is this old coot getting his information to give this analysis????

The same Magic 8 ball he used when he was Chairman. He reminds me of "Chance the Gardener" in Being There.

[Toddsterpatriot]

Chance could walk on water, Alan, not so much.

[bamagirl1944]

The better question is why didn't Greenspan do something about the loose credit that created the housing bubble while he was still employed.

True, that would have been even better.

[Freedom_Is_Not_Free]

Greenspan sees a housing bottom. Greenspan saw housing only going up. Greenspan saw a housing slump would not affect the greater economy.

Greenspan has NO credibility. None. Housing isn’t close to a bottom. Bank losses aren’t close to being finished yet. Greenspan is close to senility.

[M. Dodge Thomas]

No. My point is that Greenspan's is a theorist's view of the situation: houses are like grain, and the prices will stabilize because investors will buy and hold vacant residential properties. Mine is a practical view (I inspect such properties for a living): vacant residential property is a *very* perishable commodity, subject to rapid deterioration and and vandalism.

Greenspan's comment is an example of a "ivy tower" conservative's point of view just as divorced as any pointy-headed liberal's from the actual behavior of actual human beings, and this a kind of mistake he's made a career of making. It's why for example he was unable to foresee that the ordinary operation of self-interest and greed would lead politicians, lenders and borrowers into the trap of making and accepting loans they could not reasonably be expected to be repaid on the assumption that a greater fool would soon take the appreciated property off their hands. And why for years - when was obvious even such much less sophisticated observers as myself - he persisted in maintaining that there was no bubble, and that if markets were valuing property at two and three and four times the historic normal ratio of purchase price to potential rental income, then those valuations must be correct.

Greenspan is lost in theory... a theory which includes self-deluded denial of an unpleasant fact of which we are now being reminded: the ultimate function of prudent regulation is not to protect the stupid, the ill-informed or the spendthrift from themselves, it's to protect the intelligent, the well-informed and prudent from such people and their personal follies.

You, and I, and everyone else would who engaged in intelligent self-restraint and economic rectitude are now going to be paying the price to cleanup the results of Mr. Greenspan's ideological distaste for common sense regulation.