20-20 Hindsight: Greenspan Acknowledges Missing Sub-Prime Threat

Continuing the limited revisionism started by Ben Bernanke yesterday, yeah, that sub-prime thing is a bigger mess than we thought, but we still did not do anything wrong, leaked today are some of Greenspan’s comments in an interview to be telecast Sunday on 60 Minutes, in which Chairman Al acknowledges he did not see the damage sub-prime lending could do to the economy.

The interview is pumping his biography, to be released Monday. I am sure it is difficult for him to admit the patently obvious, (missing the whole sub-prime thing) because it may tarnish the spotless reputation he did so much to create, the peerless mystical economic oracle who kept the economy growing just right, spoke in Casey Stengel riddles, though praised for always giving clear guidance the markets, even though minutes of Fed meetings are still secret for 90 days.

They should be live on-line.

At one time, CNBC even predicted the Fed’s interest rate actions on how big a briefcase he took in to the meetings.

A few years, ago he said all home markets in the US were local, there was no national real estate market, so how could there be a national real estate bubble? He, more than anyone, should have understood this is a global economy, and the market for dollars is international. If you print them, they will lend. If you lend more this year than last year, ceteris paribus, (all other things being equal) you have to lower your lending standards to lend it all out.

Now that the real estate market is tanking across the country, will there be a revisionist statement on that next month?

How about taking some personal responsibility for the inevitable consequences of your actions?
Bankruptcy lawyers like myself have seen the consequences in the trenches for years, people who could not afford the loan from day one, applications fabricated by brokers hired by the mortgage companies, appraisals more mythical than even Greenspan’s status, everything outsourced so the lender is isolated from the borrower, ARM rates adjusting after the teaser time period expired to more than the borrower could afford, but why should the lender care? They just flip the mortgage anyway.

Greenspan joins arms with his successor by stating: “Well, it was nothing to look into particularly because we knew there was a number of such practices going on, but it’s very difficult for banking regulators to deal with that.”

He stands by all the interest rate cuts and easy money on his watch, and even defends helicopter Ben.

Countrywide announces 12 billion dollars in financing today, and everything is rosy again on Wall Street. Talking heads, current and former Fed heads agree, the Emperor’s clothes are the most magnificent raiments in sartorial history.

Watch for more acknowledgment of the Emperor’s missing garments, a hat here, a sock there, until even Al and Ben are forced to acknowledge his complete abject nudity.