Replies

Greenspan says ARMs might be better deal
http://www.usatoday.com/money/economy/fed/2004-02-23-greenspan-debt_x.htm

Fed chief pushing ARMs
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2004/03/02/BUG275BONF1.DTL

http://themessthatgreenspanmade.blogspot.com/2007/10/alan-greenspan-on-arms-in-2004.html

Remarks by Chairman Alan Greenspan (actual speech text, referenced item is just before his conclusion)
http://www.federalreserve.gov/boarddocs/speeches/2004/20040223/default.htm

Do a search, you will find all kinds of articles for and against this when it first came out, I just picked some of the first ones to come up.

You also have to take into consideration that they, the FED, was signaling before they raised rates that they where going to do so which they did June 2004. As far as I can tell or remember there was no retraction to this ‘suggestion’ to lenders and lendees.

Of course now Greenspan is trying to distance himself from this, well he has been doing this since late July of this year I believe or some time not long after that which is when the subprime was just starting to show its head to the public.

One way homeowners attempt to manage their payment risk is to use fixed-rate mortgages, which typically allow homeowners to prepay their debt when interest rates fall but do not involve an increase in payments when interest rates rise. Homeowners pay a lot of money for the right to refinance and for the insurance against increasing mortgage payments. Calculations by market analysts of the "option adjusted spread" on mortgages suggest that the cost of these benefits conferred by fixed-rate mortgages can range from 0.5 percent to 1.2 percent, raising homeowners' annual after-tax mortgage payments by several thousand dollars. Indeed, recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade, though this would not have been the case, of course, had interest rates trended sharply upward.

The above is the proof for your claim, "He also encouraged folks to go for the adjustable rate mortgages (ARM’s) a month before they where going to do their interest rate rise for the next 2 years. He knew what they where going to do and why they where going it, yet encourage people to go into ARM’s"?

Really?