Greenspan on 60 Minutes - I call BS

Exsubmariner · #1 09-13-2007, 05:20 PM

This was buried a little way down the left column on Drudge.

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Greenspan says he knew about the questionable subprime lending tactics that gave loans to homebuyers and investors with low adjustable interest rates that could rise precipitously, but not the severe economic consequences they posed. "While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late," he tells Stahl. "I really didn't get it until very late in 2005 and 2006."

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I'm sorry.

BULL - F____ING - S__T !!!!!

Like the head of the Federal Reserve had no clue that over-gassing the US money supply would lead to poor lending practices to people who have no financial sense or a history of not paying back what's loaned to them.

I guess the next thing he is going to say is that he had no idea that printing money would lead to inflation.

I guess it might be no suprise if that was the case as his successor thinks that the answer to inflation is more inflation.

I guess this kind of blows the theory of the hyper competant banking conspiracy.....

AWoodside · #2 09-13-2007, 05:25 PM

Yeah, pretty ridiculous. If we're to take Greenspan at face value things are not looking good for a system that heavily relies on the competence and benevolence of a small, controlling group.

Copernicus · #3 09-13-2007, 05:28 PM

He doesnt say he didnt recognize that it COULD happen. He says he didnt realize the EXTENT to which it happened. It isn't suprising that he wasnt focused on it then, since it was in only in late 2005 and early 2006 that subprime originations took off, and at the time he was busy handing off the job to BB.

AWoodside · #4 09-13-2007, 05:32 PM

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He doesnt say he didnt recognize that it COULD happen. He says he didnt realize the EXTENT to which it happened. It isn't suprising that he wasnt focused on it then, since it was in only in late 2005 and early 2006 that subprime originations took off, and at the time he was busy handing off the job to BB.

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Somehow this doesn't make me feel like the value of my dollars are any more secure.

Copernicus · #5 09-13-2007, 05:38 PM

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He doesnt say he didnt recognize that it COULD happen. He says he didnt realize the EXTENT to which it happened. It isn't suprising that he wasnt focused on it then, since it was in only in late 2005 and early 2006 that subprime originations took off, and at the time he was busy handing off the job to BB.

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Somehow this doesn't make me feel like the value of my dollars are any more secure.

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Why? There was an overreaction to a minor issue that will work its way through the system. Those kinds of shocks will always happen...not all of them can be anticipated. What is more important is the reaction to those shocks and keeping them from getting out of hand and having long lasting repercussions.

The market has absorbed subprime at this point, and has withstood a terrible jobs report, that, at least to a great extent, was a reaction to subprime. Is recesssion in the near future possible? Of course, bull markets do come to an end, or they wouldnt be any bull and bear markets. On the whole though, fundamentals are still strong.

If anything the whole situation should make you feel MORE confident.

AWoodside · #6 09-13-2007, 08:06 PM

[ QUOTE ]
[ QUOTE ]
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He doesnt say he didnt recognize that it COULD happen. He says he didnt realize the EXTENT to which it happened. It isn't suprising that he wasnt focused on it then, since it was in only in late 2005 and early 2006 that subprime originations took off, and at the time he was busy handing off the job to BB.

[/ QUOTE ]

Somehow this doesn't make me feel like the value of my dollars are any more secure.

[/ QUOTE ]

Why? There was an overreaction to a minor issue that will work its way through the system. Those kinds of shocks will always happen...not all of them can be anticipated. What is more important is the reaction to those shocks and keeping them from getting out of hand and having long lasting repercussions.

The market has absorbed subprime at this point, and has withstood a terrible jobs report, that, at least to a great extent, was a reaction to subprime. Is recesssion in the near future possible? Of course, bull markets do come to an end, or they wouldnt be any bull and bear markets. On the whole though, fundamentals are still strong.

If anything the whole situation should make you feel MORE confident.

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It seems like your saying that the market has absorbed the sub-prime debacle in spite of the actions of the fed, which I mostly agree with. Although, you could arguing that it was the fed's response that allowed the market to react effectively... I'm not sure. In any case, it's not really salient to the point I'm making. The reason I said that I wasn't any more comfortable is that, however you slice it, our monetary policy is governed by a very small number of very powerful men. There are some factors that push their behavior in the right direction sure, but the fact remains that we rely on a small group to be not only benevolent, but competent to boot in order to keep our economy on track. Even if you could convincingly argue that this system is +EV I don't think we have a big enough bankroll to handle the variance.

Copernicus · #7 09-13-2007, 08:34 PM

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[ QUOTE ]
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He doesnt say he didnt recognize that it COULD happen. He says he didnt realize the EXTENT to which it happened. It isn't suprising that he wasnt focused on it then, since it was in only in late 2005 and early 2006 that subprime originations took off, and at the time he was busy handing off the job to BB.

[/ QUOTE ]

Somehow this doesn't make me feel like the value of my dollars are any more secure.

[/ QUOTE ]

Why? There was an overreaction to a minor issue that will work its way through the system. Those kinds of shocks will always happen...not all of them can be anticipated. What is more important is the reaction to those shocks and keeping them from getting out of hand and having long lasting repercussions.

The market has absorbed subprime at this point, and has withstood a terrible jobs report, that, at least to a great extent, was a reaction to subprime. Is recesssion in the near future possible? Of course, bull markets do come to an end, or they wouldnt be any bull and bear markets. On the whole though, fundamentals are still strong.

If anything the whole situation should make you feel MORE confident.

[/ QUOTE ]

It seems like your saying that the market has absorbed the sub-prime debacle in spite of the actions of the fed, which I mostly agree with. Although, you could arguing that it was the fed's response that allowed the market to react effectively... I'm not sure. In any case, it's not really salient to the point I'm making. The reason I said that I wasn't any more comfortable is that, however you slice it, our monetary policy is governed by a very small number of very powerful men. There are some factors that push their behavior in the right direction sure, but the fact remains that we rely on a small group to be not only benevolent, but competent to boot in order to keep our economy on track. Even if you could convincingly argue that this system is +EV I don't think we have a big enough bankroll to handle the variance.

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No, I was not arguing "in spite of". While I don't think Fed action was quick enough or decisive enough, it appears so far to have helped.

Benevolence is a non-issue raised be conspiracy nuts and irrelevant. Competence is obviously not guaranteed. However, with regard to to inflation and the moderating the valleys of the business cycle the Fed has demonstrated a growing ability to reduce the variance you are so worried about. Economic theory that isnt supported by empirical data is worth just about the cost of the paper and ink it took to write it down. The Fed has come a long way, even if by trial and error and learning from that empirical data, and I see no reason to think that it wont continue to improve.

Exsubmariner · #8 09-13-2007, 11:54 PM

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He doesnt say he didnt recognize that it COULD happen. He says he didnt realize the EXTENT to which it happened. It isn't suprising that he wasnt focused on it then, since it was in only in late 2005 and early 2006 that subprime originations took off, and at the time he was busy handing off the job to BB.

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That's quite the clever dodge. He had to know the amount of cheap money sloshing around, he was head of the organization that was printing, for crying out loud. He has to understand that the only way to make money with money is to lend it, so it stands to reason that the banks are going to push this cheap money to lenders in any way they can.

Maybe his models were off. Perhaps he should talk to the global warming folks on how to make better models (sic).

Exsubmariner · #9 09-13-2007, 11:57 PM

[ QUOTE ]
Yeah, pretty ridiculous. If we're to take Greenspan at face value things are not looking good for a system that heavily relies on the competence and benevolence of a small, controlling group.

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What's absolutely astounding is that to take Greenspan at his word dispells the myth surrounding him as the most competant chairman of the federal reserve that has ever lived. I'm not too worried about that small group of people being benevolent, however. The way things work, they have incentive to be.

Exsubmariner · #10 09-14-2007, 12:02 AM

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However, with regard to to inflation and the moderating the valleys of the business cycle the Fed has demonstrated a growing ability to reduce the variance you are so worried about. Economic theory that isnt supported by empirical data is worth just about the cost of the paper and ink it took to write it down. The Fed has come a long way, even if by trial and error and learning from that empirical data, and I see no reason to think that it wont continue to improve.

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This is possibly the most rational statement about the Fed as an organization that I have ever read on this board. As I said above, I think the incentives are there for the Fed to have a positive effect on the US Economy overall. They may make some hideous errors time to time, but being successful in their mission is positive for them. They get to keep their monopoly, be on top of the lending pyramid, keep printing money, etc.