Editing Alan Greenspan (section)

===Housing bubble===
In the wake of the [[Subprime mortgage crisis|subprime mortgage and credit crisis]] in 2007, Greenspan stated that there was a [[economic bubble|bubble]] in the U.S. housing market, warning in 2007 of "large double digit declines" in home values "larger than most people expect".<ref name="Greenspan admits bubble FT">{{cite news |first=Krishna |last=Guha |title= Greenspan Alert on US House Prices |date=September 17, 2007 |work=Financial Times |url=http://www.ft.com/cms/s/0/31207860-647f-11dc-90ea-0000779fd2ac.html |access-date=October 17, 2008 |archive-url=https://web.archive.org/web/20070921031032/http://www.ft.com/cms/s/0/31207860-647f-11dc-90ea-0000779fd2ac.html |archive-date=September 21, 2007 |url-status=live}}</ref> Greenspan also noted, however, "I really didn't get it until very late in 2005 and 2006."<ref>{{cite news|first=Mark |last= Felsenthal |title= Greenspan Says Didn't See Subprime Storm Brewing |date=September 13, 2007 |work=Reuters |url=https://www.reuters.com/article/newsOne/idUSWBT00756820070913 |access-date=June 22, 2009}}</ref>

Greenspan stated that the housing bubble was "fundamentally engendered by the decline in real long-term interest rates",<ref name="Greenspan interest rates FT">{{cite news |first=Krishna |last=Guha |title=A Global Outlook |work=Financial Times |date=September 16, 2007 |url=http://www.ft.com/cms/s/0/976b7442-6486-11dc-90ea-0000779fd2ac.html |archive-url=https://ghostarchive.org/archive/20221210/http://www.ft.com/cms/s/0/976b7442-6486-11dc-90ea-0000779fd2ac.html |archive-date=December 10, 2022 |url-access=subscription |url-status=live |access-date=October 17, 2008}}</ref> though he also claims that long-term interest rates are beyond the control of central banks because "the market value of global long-term securities is approaching $100 trillion" and thus these and other asset markets are large enough that they "now swamp the resources of central banks".<ref name="Greenspan mortgage crisis roots WSJ">{{cite web |last=Greenspan |first=Alan |title=The Roots of the Mortgage Crisis |work=Wall Street Journal |date=December 12, 2007 |url=http://opinionjournal.com/editorial/feature.html?id=110010981 |access-date=June 22, 2009 |ref=none}}</ref>

After the [[September 11, 2001 attacks]], the [[Federal Open Market Committee]] voted to reduce the [[federal funds rate]] from 3.5% to 3.0%.<ref>{{cite news | url = http://www.federalreserve.gov/boarddocs/hh/2002/February/FullReport.txt |title = Monetary Policy Report to the Congress |date=February 27, 2002 |access-date=June 17, 2009 |archive-url =https://web.archive.org/web/20090511163423/http://www.federalreserve.gov/boarddocs/hh/2002/February/FullReport.txt |archive-date=May 11, 2009 |url-status=live}}</ref> Then, after the [[accounting scandals]] of 2002, the Fed dropped the federal funds rate from then current 1.25% to 1.00%.<ref name=hearing>{{cite web |url=http://www.house.gov/jec/hearings/11-13-02.pdf |title=Economic Outlook Hearing before the Joint Economic Committee, Congress of the United States |date=November 13, 2002 |publisher=U.S. Government Printing Office |access-date=June 17, 2009 |archive-url=https://web.archive.org/web/20090629181728/http://www.house.gov/jec/hearings/11-13-02.pdf |archive-date=June 29, 2009 |url-status=live}}</ref> Greenspan stated that this drop in rates would have the effect of leading to a surge in home sales and refinancing, adding that "Besides sustaining the demand for new construction, mortgage markets have also been a powerful stabilizing force over the past two years of economic distress by facilitating the extraction of some of the equity that homeowners have built up over the years".<ref name=hearing/>

According to some, however, Greenspan's policies of adjusting interest rates to historic lows contributed to a housing bubble in the United States.<ref>{{cite book |last=Ritholtz |first=Barry |title=Bailout Nation |url=https://archive.org/details/bailoutnationhow0000rith |url-access=registration |location=New York |publisher=Wiley |year=2009 |isbn=978-0-470-52038-3}}</ref> The [[Federal Reserve]] acknowledged the connection between lower interest rates, higher home values, and the increased liquidity the higher home values bring to the overall economy: "Like other asset prices, house prices are influenced by interest rates, and in some countries, the housing market is a key channel of monetary policy transmission."<ref>{{cite report |url= http://www.federalreserve.gov/pubs/ifdp/2005/841/ifdp841.pdf |title= House Prices and Monetary Policy: A Cross-Country Study |first1= Alan G. |last1=Ahearne |first2=John |last2= Ammer |first3=Brian M. |last3=Doyle |first4=Linda S. |last4=Kole |first5=Robert F. |last5=Martin |date=September 2005 |publisher=Board of Governors of the Federal Reserve System |name-list-style=amp}}</ref>

In a February 23, 2004, speech,<ref name="debt">{{cite conference |url=http://www.federalreserve.gov/boarddocs/speeches/2004/20040223/ |title=Understanding household debt obligations |conference= Credit Union National Association 2004 Governmental Affairs Conference |publisher=[[Federal Reserve Board]] |last=Greenspan |first=Alan |date=February 23, 2004 |access-date=June 22, 2009}}</ref> Greenspan suggested that more homeowners should consider taking out [[adjustable-rate mortgage]]s (ARMs) where the interest rate adjusts itself to the current interest in the market.<ref>{{cite news |url=https://www.usatoday.com/money/economy/fed/2004-02-23-greenspan-debt_x.htm |title= Greenspan Says ARMs Might Be Better Deal |work=USA Today |first1=Sue |last1=Kirchhoff |first2=Barbara |last2=Hagenbaugh |date= February 23, 2004 |access-date=June 17, 2009}}</ref> The Fed's own funds rate was at a then all-time-low of 1%. A few months after his recommendation, Greenspan began raising interest rates, in a series of rate hikes that would bring the funds rate to 5.25% about two years later.<ref>{{cite news |url=http://www.atlanticfreepress.com/content/view/768/81/ |title=Connect the Dots |last=Martenson |first=Chris |date=January 23, 2007 |publisher=Atlantic Free Press |access-date=June 17, 2009 |url-status=dead |archive-url=https://archive.today/20120718195427/http://www.atlanticfreepress.com/content/view/768/81/ |archive-date=July 18, 2012}}</ref> A triggering factor in the [[2007 subprime mortgage financial crisis]] is believed to be the many subprime ARMs that reset at much higher interest rates than what the borrower paid during the first few years of the mortgage.

In 2008, Greenspan expressed great frustration that the February 23 speech was used to criticize him on ARMs and the [[subprime mortgage crisis]], and stated that he had made countervailing comments eight days after it that praised traditional fixed-rate mortgages.<ref>{{cite news|last=Ip |first=Greg |title=His Legacy Tarnished, Greenspan Goes on Defensive |pages=A1 |work=Wall Street Journal |url=https://www.wsj.com/articles/SB120760341392296107 |access-date=April 8, 2008 |date=April 8, 2008 |archive-url=https://web.archive.org/web/20080411225037/http://online.wsj.com/article/SB120760341392296107.html |archive-date=April 11, 2008 |url-status=live }}</ref> In that speech, Greenspan had suggested that lenders should offer to home purchasers a greater variety of "mortgage product alternatives" other than traditional fixed-rate mortgages.<ref name="debt" /> Greenspan also praised the rise of the subprime mortgage industry and its tools for assessing credit-worthiness:
{{blockquote|text=Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country&nbsp;... With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers.&nbsp;... Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s.<ref>{{cite conference |title=Consumer Finance |first=Alan |last=Greenspan |conference=Federal Reserve System's Fourth Annual Community Affairs Research Conference |publisher=[[Federal Reserve Board]] |date=April 8, 2005 |url=http://www.federalreserve.gov/BoardDocs/speeches/2005/20050408/default.htm |access-date=June 22, 2009 |archive-url=https://web.archive.org/web/20090616124302/http://www.federalreserve.gov/BoardDocs/speeches/2005/20050408/default.htm |archive-date=June 16, 2009 |url-status=live}}</ref>}}

The [[subprime lending|subprime]] mortgage industry collapsed in March 2007, with many of the largest lenders filing for bankruptcy protection in the face of spiraling foreclosure rates. For these reasons, Greenspan has been criticized for his role in the rise of the housing bubble and the subsequent problems in the mortgage industry,<ref>{{cite news |title=The Great Unraveling |author= Roach, Stephen S. |publisher=[[Morgan Stanley]] |date=March 16, 2007 |url=http://www.morganstanley.com/views/gef/archive/2007/20070316-Fri.html |    access-date  =  June 14, 2022 |      archive-url  =  https://web.archive.org/web/20070705213834/http://www.rgemonitor.com/blog/roubini/184125   |  archive-date  = July 5, 2007 |author-link= Stephen S. Roach }}</ref><ref>{{cite news|title=Who is to Blame for the Mortgage Carnage and Coming Financial Disaster? Unregulated Free Market Fundamentalism Zealotry |author= Roubini, Nouriel | work = RGE Monitor |date=March 19, 2007 |url=http://www.rgemonitor.com/blog/roubini/184125 | format = Blog |url-status=dead |archive-url=https://web.archive.org/web/20070705213834/http://www.rgemonitor.com/blog/roubini/184125 |archive-date=July 5, 2007 |author-link=Nouriel Roubini }}</ref> as well as "engineering" the housing bubble itself.

In 2004, ''[[Businessweek]]'' magazine analysts argued: "It was the Federal Reserve-engineered decline in rates that inflated the housing bubble&nbsp;... the most troublesome aspect of the price runup is that many recent buyers are squeezing into houses that they can barely afford by taking advantage of the lower rates available from adjustable-rate mortgages. That leaves them fully exposed to rising rates."<ref>{{cite web |url=http://www.businessweek.com/magazine/content/04_29/b3892064_mz011.htm |archive-url=https://web.archive.org/web/20040714033738/http://www.businessweek.com/magazine/content/04_29/b3892064_mz011.htm |url-status=dead |archive-date=July 14, 2004 |work= BusinessWeek |date=July 19, 2004 |title=Is A Housing Bubble About To Burst? |author=Coy, Peter |access-date=June 22, 2009|display-authors=etal}}</ref>

In September 2008, [[Joseph Stiglitz]] stated that Greenspan "didn't really believe in regulation; when the excesses of the financial system were noted, (he and others) called for self-regulation—an [[oxymoron]]".<ref>{{cite news|first=Joseph |last=Stiglitz |title=How to Prevent the Next Wall Street Crisis |url= http://www.cnn.com/2008/POLITICS/09/17/stiglitz.crisis/ |work=CNN |date=September 17, 2008}}</ref> Greenspan, according to ''The New York Times'', says he himself is blameless.<ref>{{cite news |first=Jackie |last=Calmes |title=In Washington, Financial Furor Is a First-Rate Chance to Assess Blame |url=https://www.nytimes.com/2008/09/18/business/18cong.html |work=The New York Times |date=September 17, 2008 }}</ref> On April 6, 2005, Greenspan called for a substantial increase in the regulation of [[Fannie Mae]] and [[Freddie Mac]]: "Appearing before the [[United States Senate Committee on Banking, Housing, and Urban Affairs|Senate Banking Committee]], the Fed chairman, Alan Greenspan, said the enormous portfolios of the companies—nearly a quarter of the home-mortgage market—posed significant risks to the nation's financial system should either company face significant problems."<ref>{{cite news| url = https://www.nytimes.com/2005/04/07/business/07fannie.html |work=The New York Times |title=Limits Urged in Mortgage Portfolios |date=April 7, 2005 |first=Stephen |last=Labaton |access-date=June 22, 2009}}</ref> Despite this, Greenspan still claims to be a firm believer in free markets, although in his 2007 biography he wrote, "History has not dealt kindly with the aftermath of protracted periods of low [[risk premium]]s" as seen before the credit crisis of 2008.

In 2009, [[Robert Reich]] wrote that "Greenspan's worst move was to contribute to the giant housing bubble and the worst worldwide crash since the [[Great Depression]]. In 2004 he lowered interest rates to 1%, enabling banks to borrow money for free, adjusted for inflation. Naturally, the banks wanted to borrow as much as they possibly could, then lend it out, earning nice profits. The situation screamed for government oversight of lending institutions, lest the banks lend to unfit borrowers. He refused, trusting the market to weed out bad credit risks. It did not."<ref>{{cite news |url=https://www.theguardian.com/world/2009/jan/17/george-bush-alan-greenspan |title= Alan Greenspan by Robert Reich |first=Robert |last=Reich |date=January 17, 2009 |newspaper=[[The Guardian]] |access-date=April 2, 2012 |location=London}}</ref>

In congressional testimony on October 23, 2008, Greenspan finally conceded error on regulation. ''The New York Times'' wrote, "a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending&nbsp;... Mr. Greenspan refused to accept blame for the crisis but acknowledged that his belief in deregulation had been shaken". Although many [[Republican Party (United States)|Republican]] lawmakers tried to blame the housing bubble on Fannie Mae and Freddie Mac, Greenspan placed far more blame on Wall Street for bundling subprime mortgages into securities.<ref>{{cite news |url = https://archive.nytimes.com/www.nytimes.com/2008/10/24/business/economy/24panel.html |work=The New York Times |date=October 23, 2008 |title=Greenspan Concedes Error on Regulation |last=Andrews |first=Edmund L. |access-date=February 15, 2025}}</ref>