Sellers dominated the trading on Thursday (Mar. 6), as the major stock indexes closed strongly lower on the day.
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The Economist magazine published a favorable review today of a book about the housing market crisis, and one comment from the review kind of jumped off the page:
"The story has no single villain, but Alan Greenspan comes close. Under him, the Federal Reserve fuelled the housing boom by sharply cutting the cost of short-term money."
So, from "Maestro" to "Villain" -- how's that for a reversal of fortune?
But, in truth, no Fed chairman can be anything "close" to a single villain. The fact is that he's first among equals on the Board of Governors who set policy. That board has seven members, who serve 14-year terms.
Maybe you see where I'm going with this. Today Ben Bernanke occupies the chair that was Greenspan's for some two decades, yet Bernanke has direct ties to the Fed which also go back that far. He was appointed to the Board in 2002, and even served as Chairman of the President's Council of Economic Advisors. To call him a policy "insider" is as obvious as calling the sky blue.
But what's not obvious is why Bernanke gets none of the heat that Greenspan is now feeling. The current Fed Chairman was no less intimately involved than his predecessor in the relevant policy decisions. Back when Greenspan was telling the world that potential housing problems are nothing but "froth," Bernanke could have said "That ain't froth -- that's the first ripple of a flood!!"
Not only didn't he say that… what he did say was…
…Nothing.
One other item in today's news was that for the first time on record (since 1945), U.S. homeowners' percentage of equity in their homes has fallen below 50%. And I'll bet that if I look hard enough tomorrow, a story will show up that hangs that fact around Greenspan's neck.
But one man wasn't the single villain -- or anything close to it.