What if Greenspan Had Listened?
The subprime crisis could have been avoided, NY Times writer Paul Krugman asserts in his latest column, and he’s got the facts to back it up.
These days a lot of people are saying things like that about subprime loans — mortgages issued to buyers who don’t meet the normal financial criteria for a home loan. But here’s the thing: Mr. Gramlich said those words in May 2004.
And it wasn’t his first warning. In his last book, Mr. Gramlich, who recently died of cancer, revealed that he tried to get Alan Greenspan to increase oversight of subprime lending as early as 2000, but got nowhere.
Mr. Krugman goes on to compare subprime lending in the last decade to the Wild West, a place where the government that governed best governed least. Hopefully, the return of regulation and standardization to the mortgage market will bring law to what has become a desolate ghost town.
