Alan Greenspan vs. the U.S. Supreme Court
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. [Read more]
