Former Fed Chairman Alan Greenspan told the House Oversight Committee today that he “made a mistake”. To me, a mistake is a small issue, a goof, a blunder or even a misunderstanding. Something relatively minor.
Maybe he would be better off saying he is a poor judge of human charactor……
Here is a portion of an article that appears on msnbc.com:
Greenspan told the House Oversight Committee that his belief that banks would be more prudent in their lending practices because of the need to protect their stockholders had been proven wrong by the current crisis. He called this a “mistake” in his views and said he had been shocked by that.
Greenspan said he had made a “mistake” in believing that banks in operating in their self-interest would be sufficient to protect their shareholders and the equity in their institutions.
Greenspan called this “a flaw in the model that I perceived is the critical functioning structure that defines how the world works.”
The head of the nation’s central bank for 18½ years, Greenspan said in his testimony to the committee that he and others who believed lending institutions would do a good job of protecting their shareholders are in a “state of shocked disbelief.”
I am personally in a “state of shocked disbelief” that they could believe that the big banks would not act self-serving and greedy. Now we, the taxpayers, are bailing them out and are suffering because of their actions.
I personally find it hard to believe that the banks and even the government could not see far enough into the future to see what would happen when (not if, but when) housing prices started to level off. They were betting on “paper equity” that really didn’t exist. It seems they forgot the real definition of Market Value is whatever someone is willing and ABLE to pay. When the price of a house increases faster than incomes do, forcing homeowners to spend a bigger and bigger chunk of the paycheck on a mortgage, something has to give. It looks a lot like what we are seeing right now.
I just hope we can put an end to this soon; before thousands of others lose their homes and their savings. What we don’t hear about in the media is the number of people cashing on their IRAs, 401k accounts, and other retirement assets just to continue to stay afloat and make the mortgage payments while keeping the gas & electricity on and putting food on the table.
This is not a Democrat or Republican “thing”. It is a fact that we on Main Street got sold out to Wall Street by the leaders we expected to protect us and vote the way WE want them to.
All I can say is that I would not want to be an incumbant during this election. They may just become another unemployment statistic. That is until their friends on Wall Street offer them a lobbying position……
So… who are the biggest fools? Is it us, the taxpayers and mortgage holders? Is it the government for the lack of judgement, or is it the banks for getting wrapped up in the greed and making a lot of poor decisions that required us to bail them out?
Personally, I think we are because we trusted someone else to look out for our best interests.
Wish the US luck. We are going to need it.
Scott
Your Indiana FHA and USDA lender of choice.
