Greenspan uses the R-word

Well, it must be economically official. If St. Alan says recession chances are “clearly rising” then you can make economic book on it.

Of course, St. Alan also engaged in some spinmeistering to keep his halo polished:

Greenspan again rejected criticism that his policy actions helped to feed a housing boom that eventually went bust. Critics say Greenspan held interest rates too low for too long after the 2001 recession.

To have prevented such euphoria in housing that fed a bubble in prices, Greenspan said the Fed would have had to jack up interest rates so high that it would have damaged the economy. “That would have broken the back of the economy, and brought the housing boom down,” Greenspan said.

In a word, bullshit.

First, the Fed has regulatory powers St. Alan rejected using. The Wall Street Journal has more on how St. Alan deliberately rejected the idea of more regulatory policing of lending institutions way back in 2000. And, as the Journal points out, there's a need for it.

Second, Fed could have coordinated policy with agencies such as the FDIC, in areas beyond Fed direct regulation, including jawboning these institutions not to lower the monetary reserve margin backing up their loans, for starters.

Third, St. Alan could have used the Fed bully pulpit to beat down the excess of subprime mortgages, as well as exotic mortgage-based investments such as CDOs, which were predicated on the mortgage boom.

And, in refutation to what St. Alan says about bringing the housing boom down, the housing boom is being brought down now, with more pain likely, and/or another bubbling elsewhere, than if you, YOU, had acted sooner, St. Alan.

I’m sure Andrea Mitchell will NOT be reporting on this.