Greenspan Claims Fed “Failed to Grasp” Magnitude of Housing Bubble

SEWELL CHAN
The New York Times
March 18, 2010

• A d v e r t i s e m e n t

In his most detailed examination of the causes of the financial crisis, Alan Greenspan, the former Federal Reserve chairman, acknowledged that the Fed failed to grasp the magnitude of the housing bubble but argued that its policy of low interest rates from 2002 to 2005 did not cause the bubble.

In a 48-page paper that he is to present on Friday at the Brookings Institution, Mr. Greenspan, who stepped down as Fed chairman in January 2006, expressed some remorse but stood by his conviction that little could be done to identify a bubble before it burst, much less to pop it.

“We had been lulled into a sense of complacency by the only modestly negative economic aftermaths of the stock market crash of 1987 and the dot-com boom,” Mr. Greenspan wrote. “Given history, we believed that any declines in home prices would be gradual. Destabilizing debt problems were not perceived to arise under those conditions.”

Read entire article

This article was posted: Thursday, March 18, 2010 at 2:59 pm

---

---

---

---