When they refinanced their home two years ago to pay off some bills, Robert, now 78, was working as a deliveryman. But his employer went out of business last April. Now he and Lorraine, 72, a retired nurse, are both seeking work. The rate on their mortgage has jumped from 7% to 10.5%.
Perhaps when they refinanced their mortgage two years ago, they did it on the advise of Alan Greenspan. At the time, the dust from the mortgage boom was settling, and it had pumped about $1 trillion dollars into the US economy. Money was cheap, probably the cheapest we'll ever see in my lifetime. A lot of people had locked their mortgages in at record low fixed interest rates.
Then, as the boom was ending, Greenspan gave what I have to believe to be the stupidest advise I've ever heard in my life. People needed to abandon their fixed interest loans for adjustable rate mortgages to give them financial "flexibility." This was insane, and most reasonable economists said so at the time. It would however pump more money into the US economy.
Here's the thing though, Greenspan isn't an idiot. sure, he's hack and a yes man, but he's not dumb. The question I have is did Greenspan say this to try to keep the refinancing boom going to support the economy long enough for him to reap a seven figure book deal that awaited him after his retirement?
The book deal doubled his reported net worth, and Greenspan hasn't been shy about accepting speaking fees since his retirement either. He recently accented $250,000 from Lehman Brothers as an appearance fee.
Do, did Greenspan give the housing bubble a little more elasticity just for the sake of personal gain?
No comments:
Post a Comment