Greenspan: What I really meant with that ARM speech

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The Greenspanmania will stop soon, I promise. But this, from an interview Fortune‘s Andy Serwer did with Greenspan, is really interesting:

Q: Now of course people are pointing fingers at you, Chairman Greenspan, in terms of the so-called housing bubble bursting and saying that you’re responsible or partly responsible. Look at what he said in 2004, adjustable rate mortgages are prudent. These are things that homeowners should look to invest in or buy. How do you respond to those critics?

A: I think revisionist history is coming on with a rush. The speech I made actually referred essentially to conforming mortgages at that time. Remember, subprimes were not on the horizon. They were there, but they were very small. The big rush occurred much later.

I was really taking a Fed study which had demonstrated that the insurance you’re getting to have a fixed rate mortgage was very high, and that there are a number of people who perceive that they won’t be in their home for two years, who would do far better with adjustable rate mortgages.

Now the truth of the matter is, the speech that was made in February, as I recall, 2004, and there was a big hubbub that somebody was raising the question that I was downgrading the 30-year mortgage. A week later, I was at the Economic Club of New York, and somebody asked the same question you just asked, and I said that I may have not made it clear that what really I was focusing on was a very small segment of the mortgage choices and that I thought that people who had special individual cases ought to be looking at adjustable rate mortgages.

Indeed, those took out adjustable rate mortgages within the next few weeks after I made both of those statements, had they refinanced into fixed rate 30-year mortgages 18 months later would have come out way ahead because a 30-year mortgage didn’t change. …

I have never had an adjustable rate mortgage. I always pay the price for the insurance. I like 30-year mortgages. So the bottom line is, take your choices, but I would have written the same article, same speech, that I did in February 2004.

It was a good article. It was a good speech.

It’s sort of like his explanation of his Bush tax-cut endorsement: I was saying something nuanced, but the media removed all the nuance. Which is probably true. But maybe it should have taught him to keep quiet, no?