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Tuesday, April 8, 2008

Fingerprints on the mortgage mess: Greenspan?




April 08 2008 Best-Mortgage-Companies.com
Some critics, like Stanford University economist John Taylor, who believe rates were too low for too long, blame the housing bubble on Greenspan's low-rate policy. Greenspan says “no”. He explains that if the Fed’s policies were to blame, the housing bubble would have been mostly limited to the U..S. Yet, he argues, many other countries had housing bubbles, too. The culprit, he suggested, was the glut of savings globally. Savers were competing to make loans, keeping long-term interest rates low in many countries, and stimulating housing demand. And home buyers thought adjustable-rate mortgages were the cheapest way to finance home purchases. And these adjustable rate mortgages were given to people who the lenders knew couldn’t afford them. And foreclosures followed . And these foreclosures created the housing bubble. Then there were enormous losses in subprime mortgage-backed investments. And these bad US mortgages contaminated global markets. The conclusion: the culprit isn’t Greenspan; blame the housing slump on predatory lending practices…What do you think?
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