The Greenspanmania continues

correct me if I'm wrong, but in general US interest rates are pretty much pegged not to international rates, but to rates set by the Fed....

and Greenspan is spinning his butt off here, trying to deflect blame for the housing bubble -- and more crucially, the subprime mortgage mess. (I mean, here is a guy who is supposed to be keeping track of and control the money supply in order to keep the economy on an even keel. And here we had irresponsible lending practices that had a big impact on the money supply -- and Greenspan wants to pretend that he had nothing to do with it?)

Short-term interest rates are largely determined by the Fed, long-term rates by global markets. And the biggest mortgage lending excesses appear to have happened in 2005 and 2006--after the Fed started raising rates. So I'd say blaming it all on Greenspan is wrong, but giving him a total pass (as he appears to want us to do) is a bit much as well.

"Short-term interest rates are largely determined by the Fed, long-term rates by global markets."

in the mortgage market?

"And the biggest mortgage lending excesses appear to have happened in 2005 and 2006--after the Fed started raising rates. "

oh, you mean after Greenspan told the country that ARMs were a good idea (at a time when fixed mortgages were at/near historical lows....)

Of course, I don't have any evidence, but I suspect that more than one mortgage seeker was successfully talked into an adjustable rate mortgage through a sales pitch that included Greenspan's endorsement of ARMs in 2004....

Yes, 30-year mortgage rates are set by global markets. With ARMs it's a mix of markets/banks setting the initial rate and the reset rate being linked to some short-term rate influenced by the Fed.

By the way, Greenspan was right that conventional 5/1 and 7/1 ARMs were and continue to be a great deal for a lot of people. By taking on a bit of interest-rate risk that banks and investors were charging a premium to bear, you could save a ton on your early payments. And so far long-term rates on conforming loans have stayed low enough that, once the reset hits, you can still refinance on pretty good terms--if you happen to have good credit and a loan of $417,000 or less.

The problem was the one-year teaser rates, super-lax lending standards, etc. The worst of this occurred outside the direct purview of the Fed and other banking regulators--and would have taken legislative action to stop--but I think it's fair to say that Greenspan's disdain for regulation kept him from taking steps that may have reined things in a little.