Greenspeak is back! Former Fed Chairman Alan Greenspan testified today before the Financial Crisis Inquiry Commission. His testimony before the commission brought back memories of 21 years of congressional appearances. These sessions were often dominated by obfuscation and broad philosophical views from earth orbit perspective, far beyond the concept of a 30,000 foot overview.
There was no obfuscation by Greenspan about whose fault the credit crisis and housing bubble wasn't. It wasn't his.
After getting past that point, the former chairman's clarity of view became a little more clouded. At various times today he identified a number of 'perps.' Here follows a list of those who created the problems.
It's Fannnie's Fault
Greenspan says that the extent to which Fannie Mae was participating in the securitization of subprime mortgages was not evident until September 2009. This undercut the efforts of the Fed to reduce risky lending. He stated that it was the participation of GSEs in the subprime market that drove up home prices.
It's Congress' Fault
He stated it was Congress' responsibility to develop regulation, not the Fed. Greenspan also said, "That my views were predominating and effective in influencing the Congress is something you may perceive, but it didn't look that way from my perspective." This response followed a question from Brooksley Born: "Did your belief in deregulation have any impact on the level of regulation in the U.S. and across the world?"
It's the Fault of the Credit Markets
Greenspan denies that short- term rates set by the Fed had anything to do with the credit bubble and the housing bubble. He maintained that mortgages are pegged to longer term rates and those are determined by the market.
It's the Fault of Non-Banker Mortgage Originators
Greenspan said the most problematic mortgages were originated by non-bank brokerages. (Note 1: Later he said that origination of subprime mortgages was not a significant problem.) (Note 2: At another time, he said far greater enforcement against misrepresentation and fraud was needed.) (Note 3: Greenspan also said that the Fed regulation had been partially effective in preventing banks from issuing the worst mortgage products. See "It's Fannie's Fault" previously.)
It's the Fault of the 'Person Responsible'
The reason the Fed did not take more action to issue regulations regarding mortgages, according to Greenspan, was that 'the person responsible' did not bring it to the Fed's attention. Of course, Greenspan also said, previously in the testimony, that he had warned the Fed Open Market Committee in 2002 that the housing boom could not continue. (Note: 2002 FOMC meeting notes did not become public until 2007.)