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The Greenspan Defense
by Felix Salmon
Apr 08, 2008
Apr 08, 2008
Have you had enough Alan Greenspan yet? Just in case his interview with Greg Ip today isn't enough for you, I should also point out his 1,638-word "response to my critics" over at Martin Wolf's FT.com forum. There are some reasonable points in there, and some unreasonable ones too:
...Some argue that adjustable rate mortgage (ARM) originations fueled the bubble. Yet the ARM's share of total originations is a very weak forecaster of home prices, implying ARMs, although a source of cheap financing, are not a determinant of home prices. If ARMs were not available from 2001 to 2004, home purchases presumably would have been financed with long term debt, which was also very affordable.
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