bobbyw24
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- Sep 10, 2007
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Alan Greenspan disputed suggestions by his former central bank colleague and current San Francisco Federal Reserve Bank President Janet Yellen that the Fed could have headed off the housing bubble by raising interest rates.
“The general notion the Fed was propagator of the bubble by monetary policy does not hold up to the evidence,” the former Fed chairman said last week on Bloomberg Television.
Yellen, who served as a governor on the Washington-based Fed board from 1994 to 1997 when Greenspan was at the helm, told a conference last June that “higher short-term interest rates probably would have restrained the demand for housing” and “slowed the pace of house price increases” before the bubble burst.
Greenspan said that the rise in house prices was fed by low long-term interest rates on Treasury securities and home loans that stayed down even as the Fed began tightening credit in 2004.
“We ran into what we called the conundrum,” he said. “For decades, every time the Fed raised its short-term rates, the 10-year note, which is really a proxy for mortgage rates, the yield went up with it. This time it did not.”
http://www.chron.com/disp/story.mpl...stonchronicle/business+(chron.com+-+Business)
“The general notion the Fed was propagator of the bubble by monetary policy does not hold up to the evidence,” the former Fed chairman said last week on Bloomberg Television.
Yellen, who served as a governor on the Washington-based Fed board from 1994 to 1997 when Greenspan was at the helm, told a conference last June that “higher short-term interest rates probably would have restrained the demand for housing” and “slowed the pace of house price increases” before the bubble burst.
Greenspan said that the rise in house prices was fed by low long-term interest rates on Treasury securities and home loans that stayed down even as the Fed began tightening credit in 2004.
“We ran into what we called the conundrum,” he said. “For decades, every time the Fed raised its short-term rates, the 10-year note, which is really a proxy for mortgage rates, the yield went up with it. This time it did not.”
http://www.chron.com/disp/story.mpl...stonchronicle/business+(chron.com+-+Business)
