Greenspan recommends ARMs 2004

Discussion in 'Economics' started by empee, Jan 16, 2008.

  1. empee


    Federal Reserve Chairman Alan Greenspan said Monday that Americans' preference for long-term, fixed-rate mortgages means many are paying more than necessary for their homes and suggested consumers would benefit if lenders offered more alternatives.


    I'm really glad we have a FEDERAL RESERVE to ensure stable employment and low inflation. What a joke. I wonder why they don't call him to testify in front of Congress.

    Its ridiculous that the public allows themselves to be rinsed of their assets so regularly by the actions of this private corporation.

    My favorite part, of course, is when Ben always points to the "Congressional Mandate" whenever they ask him any questions with substance.

    It really is legalized slavery.
  2. empee


  3. Greenspan did NOT advocate ARMS. USA Today, the NY TImes, along with CNBC and other media outlets did the public a stunning disservice by mis-reporting his February 23 2004 speech.

    Here is the actual transcript of the speech. NOWHERE does he advocate ARMS.

    If you want to have an actual reason to bash the Fed, start with their hypocritical stance of "greater transparency" while at the same time ending the public issuance of M3, Repo stats and other monetary indicators. That criticism is an actuality that can be proven by observation. The ARMS swipe is a media-generated falsehood. There are things we should be critical of, but they can be backed up by proof, not the delusions forwarded by USA Today

  4. Good post. Even Emppee's link does not say that. LOL!

  5. Daal


    there is a bubble on fed conspiracy theorists and greenspan bashers(or bernanke for that matter). i dont think its popping anytime soon with all these headlines. I think only a equity market boom ala 90's could reverse it, greenspan seem to be right, the fed independecy will be under threat in the coming years
  6. empee


    One way homeowners attempt to manage their payment risk is to use fixed-rate mortgages, which typically allow homeowners to prepay their debt when interest rates fall but do not involve an increase in payments when interest rates rise. Homeowners pay a lot of money for the right to refinance and for the insurance against increasing mortgage payments. Calculations by market analysts of the "option adjusted spread" on mortgages suggest that the cost of these benefits conferred by fixed-rate mortgages can range from 0.5 percent to 1.2 percent, raising homeowners' annual after-tax mortgage payments by several thousand dollars. Indeed, recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade, though this would not have been the case, of course, had interest rates trended sharply upward.

    American homeowners clearly like the certainty of fixed mortgage payments. This preference is in striking contrast to the situation in some other countries, where adjustable-rate mortgages are far more common and where efforts to introduce American-type fixed-rate mortgages generally have not been successful. Fixed-rate mortgages seem unduly expensive to households in other countries. One possible reason is that these mortgages effectively charge homeowners high fees for protection against rising interest rates and for the right to refinance.

    American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home.

    Please explain what he meant by mortgage alternatives? You mean the 40,50,100 year mortgage?

    In terms of Greenspan speak, I think its pretty clear. I do agree on M3, but then again, I suppose its the vast liberal media thats out to get the FED right, and I suppose you believe inflation is tame too? I'm not bashing the FED to be a consipracy theorist; I think anyone looking at it objectively will concur that Greenspan was advocating ARM and goading the industry, I find it interesting during the whole process when Mozilo, Franklin Raines (eventually), and others will be named we've heard nothing about missteps by the FED, nor anyone holding them culpable for their actions.

    Its hilarious that we need the FED to fix the problems they create.

    Objectively, you can argue there are good reasons for the FED, but clearly they were advocating creative lending to "help poor people" or whateva.
  7. Daal


    where is the part where he 'cheerleads' people into getting arms of home sizes they cant afford and then lying in the application to get it?or lying to get a 2nd mortage so they can put 0% down?
    all he is saying is something that is factually true. people would have saved money due a secular fall in interest rates by using arms
    the blame mentality is still so widespread is scary. you had adults buying homes lying, being completly irresponsible and ignorant and you would think these guys would walk with most of the blame but somehow they are the victims of the old man who lowered interest rates after a equity bubble, a recession and 9/11
  8. I remember reading about this and hearing it on some financial channels.

    I thought to myself why would he encourage this when we were at the END of a rate easing cycle.

    I knew better than to do something so stupid. But it seems alot of Americans were not so wise.

    You must educate yourself, and learn to work the system to your favor. If your lazy, the goverment will take everything it can from you, learn how to work the system to your advantage.