Greenspan: I Was ‘Mystified’ By The Subprime Mortgage Market
Greenspan: I Was ‘Mystified’ By The Subprime Mortgage Market
In October, as the true extent of the financial crisis was being realized everywhere, former Federal Reserve Chair Alan Greenspan admitted that the crisis was “broader than anything I could have imagined.” And the Greenspan confession tour is evidently not over.
In a forthcoming CNBC documentary, Greenspan reportedly admits that he was “mystified” by the subprime mortgage market. As DealBook reported:
Alan Greenspan, the former chairman of the Federal Reserve, told CNBC in a documentary to be shown Thursday night that he did not fully understand the scope of the subprime mortgage market until well into 2005 and could not make sense of the complex derivative products created out of mortgages.
“So everybody in retrospect now knows that that boom was developing under the markets for quite a period of time, but nobody knew it,” Mr. Greenspan told CNBC’s David Faber. “In 2004, there was just no credible information on that. It wasn’t until we got well into 2005 that the first inklings that that was developing was emerging.“
In 2001, subprime mortgages accounted for 5 percent of mortgage originations, totaling $173.3 billion dollars. By 2005, that had grown to 20 percent, totaling $600 billion.
2 Responses to “Greenspan: I Was ‘Mystified’ By The Subprime Mortgage Market”
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“In 2001, subprime mortgages accounted for 5 percent of mortgage originations, totaling $173.3 billion dollars. By 2005, that had grown to 20 percent, totaling $600 billion.”
Beware of looking at those numbers and imagining that they reflect the actual scale of the problem. You have to consider all of the “naked” derivatives of various sorts. That’s where you get into the Trillions of Dollars.
February 12th, 2009 at 7:16 pmAt least Greenspan never paid banks to take their money out of the credit and commercial paper markets to put it on deposit with the Fed as excess reserves.
February 13th, 2009 at 10:53 am