This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Who's to Blame for the Economy? The Fed

Stocks in this article: BAC C AIG

Each day this week, a different writer from will make the case for why one of five prime culprits -- the banks, Congress, irresponsible home buyers, the Federal Reserve or the rating agencies -- is most to blame for the credit crisis and ensuing economic meltdown.

Alan Greenspan was lauded by Wall Street as the maestro for his role in presiding over a 9,000-point rally on the Dow Jones Industrial Average over his 18 years as chairman of the Federal Reserve.

But on the way to becoming "the greatest central banker who ever lived," a funny thing happened: The maestro played a key role in inflating a credit bubble that has put the global economy in its most dire straits since the Great Depression.


Clearly, there is plenty of blame to share among many parties for our current predicament. Homeowners bit off mortgages larger than they could chew, aided and abetted by an overzealous Congress bent on making homeownership dreams come true for record numbers of Americans.

Banks, emboldened by an era of deregulation that minimized risk (for them, unfortunately, not for the global financial system), were only too eager to make home loans to consumers who couldn't afford them, then profit off securitizing and trading them.

Who is most responsible for the credit crisis and the recession?

Federal Reserve
Ratings agencies
Irresponsible home buyers

But Greenspan's stewardship of the Fed was the most significant constant in the nearly 20 years preceding housing prices hitting their apex in 2006. Appointed by Republican President Ronald Reagan in 1987 and reappointed four times by Republicans George H.W. Bush and George W. Bush and Democrat Bill Clinton, Greenspan occupied the economic bully pulpit at a time the seeds of excess were sown.

The main criticism of Greenspan has centered on his decision to aggressively lower interest rates in the wake of the dot-com bubble's bursting in 2000, and keep them low too long. As the country battled recession, the Fed cut rates to 1% in June 2003, and did not begin to raise them again until a year later.

1 of 4

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs