Now I didn’t actually hear what former Fed chairman Alan Greenspan said today down in Boca Raton. But I couldn’t avoid reading about it, given that his words got big play on most of the financial news sites:
In a wide-ranging question-and-answer session at the Futures Industry Association meeting, Greenspan conceded it was “hard to find any such evidence” about spillover from stressed mortgages yet, but: “You can’t take 10 percent out of mortgage originations without some impact.”
“I’d expect it to — I’m waiting — but the spillovers are just not there,” he said. Some problems have turned up in collateralized debt markets, he added.
Greenspan said the housing downturn appeared to stem more from the recent stagnation in housing prices after years of appreciation than from a decline in mortgage quality but said he was not downplaying problems in so-called subprime loans.
Whatever. I can’t see much of anything newsworthy in these not particularly surprising speculations of a former government official with a background in economic forecasting. If he were still running the Fed and had the power to change short-term interest rates, sure. But he’s not.
Yet Greenspan seems to have helped spark a global mini-panic a couple weeks ago. I’m not sure what, if any, his market impact was today. But people definitely paid attention. Maybe it’s because he’s still seen as having an inside line on Fed thinking. Or maybe it’s because we’re all so accustomed to seeing him as all-powerful that his words still carry some of that residue. In any case, Paul Volcker sure doesn’t get this kind of attention.
One other thing: In the economic forecasting survey it released today, the WSJ asked economists if they thought Greenspan should shut up: 74% said no.