According to an article just published in the New York Times a couple of minutes ago - Fed and Regulators Shrugged as the Subprime Crisis Spread - which was just what I've been saying all along - about 75% of the blame lies of the FED for this mess, which is continuing to get worse and worse.
Further Alan Greenspan is so removed and out of it - he doesn't see himself as responsible for anything that went wrong:
"…Mr. Greenspan, hailed as perhaps the best central banker in history when he left the Fed in early 2006, is now feeling defensive. In an extensive interview last week, he adamantly disputed the assertion that he could have prevented the mortgage bust.
The housing bubble, he said, had far less to do with the Fed’s policy on interest rates than on a global surplus in savings that drove down interest rates and pushed up housing prices in countries around the world.
"…many Fed officials counted on the housing boom to prop up the economy after the stock market collapsed in 2000."
As for his role as a regulator, Mr. Greenspan argued that the Fed was ill-suited to investigate deceptive lending practices. "
But then, why was there a "global surplus in savings"? Where did that come from?
"…in the present situation, while the financial measures undertaken by US authorities—the maintenance of liquidity and a low-interest rate regime—have kept the US and the world economy as a whole from falling into recession, they have also created deep sources of instability. The vast expansion of liquidity and the emergence of a global financial system, well beyond the regulation of any single authority, coupled with the ever more desperate search for yield—that is, profit—have created the conditions for a financial crisis, something to which various central bankers and financial authorities have recently referred."
Most of what I wrote, and I really don't know much about Sub Prime Mortgages, is supported by this article, which is why I'm writing about it.
