Anna Schwartz blames Fed for sub-prime crisis

[ckramer]

Source: TG

According to Schwartz the original sin of the Bernanke-Greenspan Fed was to hold rates at 1 per cent from 2003 to June 2004, long after the dotcom bubble was over. "It is clear that monetary policy was too accommodative. Rates of 1 per cent were bound to encourage all kinds of risky behaviour," says Schwartz.

She is scornful of Greenspan's campaign to clear his name by blaming the bubble on an Asian saving glut, which purportedly created stimulus beyond the control of the Fed by driving down global bond rates. "This attempt to exculpate himself is not convincing. The Fed failed to confront something that was evident. It can't be blamed on global events," she says.

Read more: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/01/13/ccschwartz113.xml

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Alan Greenspan is an economic terrorist to America.

He ruined America.

[daleo]

1. Bush 1 blamed Greenspan for his losing the 1992 election

He claimed Greenspan's rates were too high. Bush 2 must have really pressured Greenspan in 2003-04.

[TomInTib]

2. It's amazing how cleanly Greenspan got off the hook.

You are right, he is an economic terrorist and should be held accountable.

There is no coincidence that Bobby Jack Perry (Perry Homes) has been the #1 contributor to GWB and the GOP over the past few cycles.

Those developers had GWB and Greenspan by the balls.

[greenvpi]

3. When will the real crooks be arrested?

I had several friends that were tricked into signing loans they can't afford. Soon their equity and their homes will be taken by the banks.

[flashl]

6. The hunt for guilty is underway ...

The finger of suspicion
Dec 19th 2007 | NEW YORK
From The Economist print edition

In America and elsewhere trial lawyers, state prosecutors and regulators look for the crime in subprime

FINANCIAL firms have already been drenched by mortgage-related losses. Now a wave of litigation threatens to assail them. According to RiskMetrics, a consulting firm, between August and October federal securities class-action lawsuits were filed in America at an annualised pace of around 270—more than double last year's total and well above the historical average. At this rate, claims could easily exceed those of the dotcom bust and options-backdating scandal combined.

Economist - Read Full Text

Advertisement for class action lawsuits are beginning to appear in my area.

[FarCenter]

4. He also went along with deregulation of the capital markets

The 1% interest rate is not his only sin.

He was also part of the movement to deregulate capital markets. The result was that the mortgages could be sold by the broker, funded by the wholesaler, packaged by the investment bankers, rated by the rating agencies and foisted on the investors without regard for sound underwriting practices. Everybody between the mortgagee and the investor gets to take a hefty helping of fees, and pass the liability on to others. THe investor is often some pension fund or other managed investment pool run by rubes with a lot of other people's money to invest.

[Turbineguy]

5. I don't think it was one or two people.

There were plenty of people who made money writing shaky loans. The banking system has changed. There was a time when you bounced a check and the bank would call you in for a quiet word. Now those who bounce checks are customers generating fat fees.

It looks like the CEO of Countrywide will get a nice 115 million severance pay after investors have lost 80% of their equity.