Conventional wisdom is quickly congealing around the idea that Alan Greenspan, presiding genius of the dot-conomy, is to blame for the subprime mortgage mess. The argument, articulated by Steve Forbes and others, goes like this: by lowering short-term interest rates to near-zero in the early years of this decade, Greenspan encouraged the spread of adjustable-rate mortgages (with low initial “teaser” rates that rise after three, five, or seven years) and ill-advised lending practices.

In his new book The Age of Turbulence, Greenspan offers this defense against these critics:

I believed then, as now, that the benefits of broadened home ownership are worth the risk. Protection of property rights, so critical to a market economy, requires a critical mass of owners to sustain political support.

It’s hard to care much about the Forbes/Greenspan fight, but Greenspan’s response is intriguing on its own.

What’s interesting is that Greenspan gives a political defense, not an economic one, for encouraging home ownership. The right answer—i.e. the answer Greenspan probably would have provided in testimony to Congress were he still Fed chairman—is that Greenspan wanted to lower interest rates because he thought that lower rates (or increased home ownership) were important to help the economy along. He could have said, for instance, that lower interest rates were necessary to scare off deflation. But he didn’t say that. Instead he defended the policy on political grounds, saying that he wanted to encourage home buying to build a constituency of home owners.

Why is this surprising? Because the Federal Reserve Board is not supposed to be a political instrument, except in the broadest sense. This is how the Fed defines its duties:

1/ conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates
2/ supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers
3/ maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
4/ providing financial services to depository institutions, the U.S. government,
and foreign official institutions, including playing a major role in operating the nation’s payments system

Of course, as everyone recognizes, the Fed isn’t above stooping to help a sitting president who finds himself in an economic pinch. That’s why even more interesting than Greenspan’s political intervention is the particular policy he wanted his constituency of home owners to defend: property rights. Property rights! Here’s the astounding chain of logic at work in Greenspan’s defense:

Capitalism depends on property rights → Home owners are more likely to support property rights → Capitalism (i.e. the economy) needs more home owners → We should lower interest rates to promote home ownership.

The problematic step is, obviously, moving from the second term to the third. Sure, it’s likely that home owners would favor certain kind of property rights, but does Greenspan really think that they’re more likely to support private property generally? Are homeowners less likely to download pirated MP3s or to buy forged Prada handbags? Are renters more likely to be unreconstructed Marxists?

Strangest of all is that Greenspan thinks that the idea of private property is seriously under attack in this country. His antiquated defense of private property would seem even odder had the NYT not just reported on his early friendship with Ayn Rand, whose father’s pharmacy was seized by the Bolsheviks in 1926. Still, it’s hard to believe he thinks that Soviet-style collectivization is such an immediate threat to his beloved market economy.

Though come to think of it, there is one place where property rights have had a hard time of it lately. In 2005 the U.S. Supreme Court decided the Kelo eminent domain case, which allowed the New London city government to seize private property to help spur… hey wait: economic development.