Greenspan points the blame

Alan Greenspan told the House Government Oversight and Reform Committee today that overeager investors are to blame for the country’s foreclosure crisis, according to an Associated Press report. These overeager investors apparently did not take into account what would happen once home prices stopped rising.

That’s right, Greenspan didn’t see it coming from his perch as head of the Federal Reserve.

The heads of numerous banks didn’t see it coming, despite all the MBA’s and financial experts on their payrolls.

But investors should have seen it coming.

I agree that some investors and some home buyers were greedy; but there were many others who were just following what they thought was credible advice from knowledgeable parties, people who were trying to put together a decent retirement nest egg or own their own home. And certainly many of these investors and home buyers believed government regulators wouldn’t allow bad investments to be sold, or bad mortgages to be made.

Oversight committee chairman Henry Waxman, who is a California Democrat, suggested Greenspan may share some of the blame here by contributing to “irresponsible lending practices” by rejecting appeals that the Fed intervene to regulate a surging subprime mortgage industry.

“The list of regulatory mistakes and misjudgments is long,” Waxman said of oversight provided by the Fed and other federal regulators, according to AP.

I think Waxman said what many people have been thinking recently. It is a little maddening to hear Greenspan suggest the foreclosure crisis is really the fault of investors. Investors do bear some of the responsibility, but so do the people who were paid to watch over the economy and regulate the financial industry. What do you think about Greenspan’s comments?

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