Fed May Rethink Greenspan's Hands-Off Approach Towards Bubbles

[Joanne98]

March 28 (Bloomberg) -- Federal Reserve officials may be rethinking their aversion to acting against asset-price bubbles, an article of faith during former Chairman Alan Greenspan's 18 years at the helm.

After this month's near-collapse of Bear Stearns Cos., Minneapolis Fed Bank President Gary Stern -- the longest-serving policy maker -- said in a speech yesterday that it's possible ``to build support'' for practices ``designed to prevent excesses.'' New York Fed President Timothy Geithner, whose district bank took on almost $30 billion of Bear Stearns assets to rescue the firm, argued two years ago for a larger role for asset prices in decision-making, and there's no indication his views have changed.

For Fed policy makers, ``the consequences of their permissiveness have become so disastrous that they simply can't keep singing the same old tune in public,'' said Tom Schlesinger, executive director at the Financial Markets Center in Howardsville, Virginia.

While the soul-searching is unlikely to result in immediate changes to monetary policy, Stern's comments show how the credit freeze has forced officials to scrutinize long-held philosophies about the Fed's role in markets, and even ask how their current policies may undercut those views.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aHacfhqvht2Q&refer=home

[ananda]

1. OK, riddle me this..

Exactly how does talking and asking questions
solve anything?

[enlightenment]

2. It bolsters their self-esteem

to say that they're "thinking about thinking about" doing something.

[Pale Blue Dot]

3. It sounds to me like they're preparing to throw Greenspan under the bus.

Just another cheery sign that things are even worse than we assume.