He's kidding--right?(Insider Report)

Last February, Federal Reserve Chairman Alan Greenspan--whose loose money and easy credit policies unleashed a surge of mortgage lending and refinancing--made it clear interest rates would soon start to rise from their historic lows. He also suggested that homeowners who had refinanced mortgages as fixed interest rates have decreased should refinance again to adjustable rate mortgages. To do so would be economic lunacy, of course--but Greenspan obviously understood that mortgage refinancing is the only engine driving consumer spending, and thereby keeping the U.S. economy aloft.

On October 19, Greenspan dispensed another dose of his distinctive economic wisdom in a speech to a bankers' convention in Washington. Defending actions he has taken during his tenure as chairman of the Federal Reserve Board which led to a big increase in homeowner debt, Greenspan "disputed analysts who worry that home buyers have become swept up in a speculative housing bubble that the Fed is partly responsible for creating."

Insisting that many measures of household debt overstate the size of debt burdens, Greenspan pointed out that property values have also increased dramatically: "Taking into account this higher level of assets, all in all the household sector seems to be in reasonably good financial shape with only modest evidence of an increased level of household financial strain." He also dismissed concerns of a "speculative bubble" in the housing market by stating that it's harder to trade houses than stocks.

Private economists reacted to Greenspan's self-serving analysis by saying, in ...