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Is Greenspan to blame?

John Dimsdale Aug 14, 2007
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Is Greenspan to blame?

John Dimsdale Aug 14, 2007
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TEXT OF STORY

Scott Jagow: There’s plenty of blame to go around for the recent market volatility. Some of the blame is being cast at the feet of former Federal Reserve chairman Alan Greenspan. Is that fair? John Dimsdale reports from Washington.


John Dimsdale: Even in retirement Alan Greenspan moves markets.

On the lecture circuit last fall, he said the worst of the housing slump was behind us, and investors kept buying. In February, he raised the specter of recession and the stock market hit a speed bump.

Today, some pundits say Greenspan’s low interest rate policies earlier this decade created a housing bubble. But Carl Tannenbaum, chief economist at LaSalle Bank, says those low interest rates were designed to keep the struggling economy going.

Carl Tannenbaum: So it’s hard to look back with perfect hindsight and re-gauge your decision that seemed like the right decision at the time.

Two years ago, the man who coined the phrase “irrational exuberance” did warn borrowers.

Alan Greenspan: History cautions that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets.

Former Fed chairman Alan Greenspan, speaking in September of 2005

In Washington, I’m John Dimsdale for Marketplace.

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