Greenspan lied, mortgages died

That’s the nickel version of St. Alan of Greenspan defending his record as Federal Reserve chairman.

But, others such as former vice-chair Alan Blinder, beg to differ:

“Lending standards were being horribly relaxed, and the Fed should have done something about that, not to mention about deceptive and in some cases fraudulent practices. This was a corner of the credit markets that was allowed to go crazy. It was populated by a lot of people with minimal financial literacy who were being sold bills of goods by mortgage salesmen.”

Former Fed governor Ned Gramlich agreed last year:

“This whole subprime experience has demonstrated that taking rates down could have some real costs, in terms of encouraging excessive subprime borrowing." There was “a giant hole in the supervisory safety net. . . . It is like a city with a murder law but no cops on the beat.”

Greenspan defended the boom in subprime mortgages as “worth the risk.”

I guess that includes the risk of lowering banks’ marginal requirements and not regulating them. Not to mention non-bank mortgage brokers.