18 December 2007

It took me awhile to figure out Greenspan...

...back in the short-lived era of the in-the-black federal budget, Greenspan told Congress it had to start giving back taxpayer money, lest a ballooning surplus weigh down the economy. When deficits returned a couple years later, he told Congress that Social Security was suddenly in crisis, and only savable with private accounts.

Why hadn't he said anything about Social Security's needs during the surplus? Shenanigans. Greenspan was not on our side on Social Security, and now this NY Times eye-opener shows where he stood on subprime lending:

Edward M. Gramlich, a Federal Reserve governor who died in September, warned nearly seven years ago that a fast-growing new breed of lenders was luring many people into risky mortgages they could not afford. But when Mr. Gramlich privately urged Fed examiners to investigate mortgage lenders affiliated with national banks, he was rebuffed by Alan Greenspan, the Fed chairman.

In 2001, a senior Treasury official, Sheila C. Bair, tried to persuade subprime lenders to adopt a code of “best practices” and to let outside monitors verify their compliance. None of the lenders would agree to the monitors, and many rejected the code itself. Even those who did adopt those practices, Ms. Bair recalled recently, soon let them slip.

And leaders of a housing advocacy group in California, meeting with Mr. Greenspan in 2004, warned that deception was increasing and unscrupulous practices were spreading. John C. Gamboa and Robert L. Gnaizda of the Greenlining Institute implored Mr. Greenspan to use his bully pulpit and press for a voluntary code of conduct.

“He never gave us a good reason, but he didn’t want to do it,” Mr. Gnaizda said last week. “He just wasn’t interested.”