Streams

Greenspan's Blind Faith

Friday, October 24, 2008

Ben Jones, blogger and independent economic analyst for the Housing Bubble Blog says the former Chairman of the Federal Reserve had plenty of opportunities to see the writing on the wall for the current financial crisis.

Guests:

Ben Jones

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Comments [46]

Bird

I think Mr. Jones was real. He did not gloat, although he could have since a previous show had proven him to be correct. I think what echoes in my mind is at the very end of this interview....The quote which mentions Japan's 17 years of recession after throwing money at their bubble. 17 years - yikes. What I don't understand is how the majority of people when they hear the truth - respond and are moved. Yet no one in power speaks of the truth. And the few who do get dubbed as crazy and shoved off the scene. Not sure where my country has gone. Maybe it truly is sucked up into "mania"...

Oct. 27 2008 05:31 PM
Ian from Brooklyn

I will copy and paste what I wrote Monday.

9] Ian from Brooklyn NY
October 20, 2008 - 10:40AM
Brian. For a few years I have been talking to people about htis topic and people have either called me crazy, ignored me or called me pessimmestic.

There is a radio station here in NYC that has DJ's that promote certain sponsors. The station is 93.5 FM. They have beeb promoting First Republic Mortgage Bankers in Floral Park. I have heard the DJ's play on immigrants emotions thru the radio on the American dream.

I have heard them push products such as NO DOC loans etc. I always wondered how if you have no documents, you can get a home loan?!

They used to push the envelope on no income, no problem. As long as you breathe, you can get a loan.

80/20's. Etc.

If I am a new immigrant from say Jamaica, come to the USA, and work at Kennedy Airport or somewhere making $450 a week, how do I afford a 450K home loan?

They played on the ignorance of people and basically chastised them theu the radio for not being what they called a "productive person" for not owning a home.

I have been to the seminars. What joke. People like this should be investigated.

To this day they still do it.

It all started out after the stock market crashed. It seems as if people had to find another creative way to swindle people out of their money to keep their lifestyles afloat. No matter what the cost. Am I reaching out too

Oct. 25 2008 06:28 PM
mancala

annoyed with annoyed, you are an dense plain and simple. Ben Jones was not saying property is Arizona is should be the same price as in Manhattan,NY. He is saying when the realtors were yelling "god isn't making any more land" to get people to buy all you have to do is take a trip from LAX to JFK take a look out any passenger window and you will see millions of acres of undeveloped land, some good and some bad. People like you who are so arrogant and self serving believe in the "its different here so it won't happen here" mentality is what drove up the prices of home to ridiculous unaffordable prices. Ben Jones has been right and has foreseen what our "educated, sophisicated" Ivy League leaders could not see.

Oct. 25 2008 06:12 AM
Big V from Silicon Valley, CA

I thought Ben's delivery was awesome.

So sorry Annoyed, but Manhattan is a cesspool of poverty-stricken has-beens; sounds like you're one of em.

You guys have to understand that Democrats and Republicans both had their hands in this, but the fact is that the bubble didn't start until Republicans gained Congress, then it went haywire all the while that Republicans had both Congress and the White House, and there is no way that the minority party is to blame.

Yes, Fannie and Freddie were a bad idea. Yes, the Democrats should not have been so eager to give poor people loans that could never have been repaid. However, those two agencies were created and fostered under a regulatory framework that was supposed to have prevented this type of thing from happening. The global credit bubble could not have been blown had the regulations not been arbitrarily lifted. We had federal judges disallowing state legislators from regulating lending in their own states, for crying out loud.

Even Republicans are now starting to admit that regulation is necessary, although begrudgingly. If humans were angels, then we would not need money at all.

Oh, and Rick: I hereby deem all comments occuring after your own to be null and void, thereby granting you forever THE LAST WORD.

Oct. 25 2008 03:13 AM
Cassandra

You guys crack me up. I couldn't get past the first comment where Barry used the term "well-respected Democrat". Had me rolling on the floor!

Thanks!

(In the event one should think this is a partisan comment, "well-respected Republican" would have been equally as funny)

well-respected Democrat! Got to remember that one!

Oct. 24 2008 06:44 PM
Larry Littlefield

"Also -- why can't anyone remember the last real-estate bust."

That's what I don't understand. After the 1980s bubble and bust, I thought it would never happen again.

I saw housing prices getting out of hand relative to income around 2000. I thought 9/11 would stop it, but it kept going. By 2003 it was at bubble levels -- a repeat of 1986-87. By 2005 it was insane.

I came across Ben's blog and another by SocMtgGuy in 2005. Thousands of people saw this coming. There were books, articles. Honest appraisers, mortgages brokers, realtors and small-time landlords posted on those blogs. The Economist called it. Fleckstein, Shiller, Baker.

This time it wasn't just the Northeast and California, but the whole country. This time it isn't just people who bought at the top who are going bust, bust a host of people who "liberated" the equity in their homes through second, third and fourth mortgages, with the cash used to live large.

Bear in mind the generational aspects of this. The generations in charge have made a series of decisions to make younger generations worse off. And yet, they expect younger generations to buy their houses and stocks at high prices relative to their incomes. With what money?

Borrowed money they can never afford to pay back.

Oct. 24 2008 06:42 PM
Bubble Believer

Annoyed - you think Ben Jones is wrong? He started a blog about the housing bubble in 2004 (according to the recording) when most people didn't even know what a housing bubble was. (Although they do now.) If you do not think New York real estate is going to fall further you should go buy a few more pieces of property as quickly as possible during this dip.

As Brian Lehrer said: "Ben Jones is one of the people who got it right and early." Yep. And you should give him the respect he is due. Unless of course, you own a lot a underwater real estate (and you don't seem to have the critical thinking skills to have avoided the bubble) in which case you should lash out at him and have the nanny state protect you from your stupidity. You seem a lot more self-serving than Mr. Jones and a few more years will show you how wrong you are.

To show my own bias I have followed Ben's blog for years and am a financial planner who has talked a lot of people out of buying real estate in San Diego thanks to the wonderful information provided on the site by Ben and other brilliant posters. And in all those years I never had an ad pop up so I have no idea what you are talking about with Adblock.

Oct. 24 2008 05:19 PM
Annoyed with Annoyed

Annoyed ......... Please quit talking trash about people or things you dont understand! You are not grasping the severity of the Housing Bubble and the damage it is causing in every household in America. So, until you have the Facts PLEASE Keep Your Mouth SHUT!!! Dont hate on people for speaking the TRUTH!!!

Oct. 24 2008 05:06 PM
Doubly Annoyed

"So Ben Jones's world, land in the middle of the Arizona desert should be worth just as much as land in mid-town Manhattan."

You must either be deaf or dumb, because he never said anything like this.

Oct. 24 2008 04:25 PM
kevin from Chelsea

I just wanted to have the last word...if you have anything to add to this;please don't.

I never get anything right and am damned average or worse. I don't understand half of what any of you's guys said.

i would just love to tell my girl that I got in the last word in this high brow conversation about the real estate market.

Desperately seeking [silent]recognition,

kevin

Oct. 24 2008 02:21 PM
superf88

i tuned into this segment in the middle. the guest was saying "the crisis was when houses cost too much for people to buy. this is the correction."

i was praying he was one of our elected officials and thoroughly enjoyed the moment.

Oct. 24 2008 01:40 PM
smidely

annoyed -- perspective please -- remember dubai (1000 times crappier than flagstaff) is worth literally 1000 times 212 prices

Oct. 24 2008 01:14 PM
Gerald Fnord from New York, NY

I don't know any Democrat who respects Orson Card, largely because Orson Card has gone fledermausesscheissisch insane on the subject of teh gay, and (in a mirro-reversal of Andre Sullivan) this has caused him to be a general pain on every issue Democrats would usually take...except that he still hasn't given up the label, because it's useful to him.

Mac and Mae _were_ involved, and the politics around them did let them act as they shouldn't have done. much as Marketolatrous politics did for the vast majority of the financial sector...Mae and Mac were not a noticeable part of the problem until the end, and even so were not the major part of it, that being the existence of an unregulated insurance market---that was necessary and sufficient, the QUANGO corps were neither. It is closer to being the opposite of what O.S. Card et generis would have you believe: if Obama had had nothing to do with F.M. and F.M, no-one in our conservative maedia would bother distorting the record so, in public, repeatedly, and with the great shouting that always accompanies a bad argument.

(The lynchpin of the problem, in my correct opinion, was the misappropriation of risk due to the corruption of the ratings agencies, and the lax oversight that allowed it.)

The same goes for the Community Redevelopment Act

Oct. 24 2008 12:00 PM
B. F from NYC

What's interesting to me is that bit that was hinted at in Ben Jones' remarks about Federal money being used to prop up unreasonable and otherwise unsustainable housing valuations. People, being people after all, don't want to face the fact that their reality of rising home prices was a temporary thing. They want the government to support that. Million dollar McMansions that are just not worth the coin? Is that what my tax dollars are to be used for? And thus people like me are locked out of the housing market?

Oct. 24 2008 11:28 AM
Annoyed

Here's one of Jones's most absurd quotes today: "To anyone flying over this country, it should be obvious there's no shortage of real estate." Is he serious? So Ben Jones's world, land in the middle of the Arizona desert should be worth just as much as land in mid-town Manhattan. Well, maybe that's true if you don't mind living in some backwater town in the middle of nowhere. I'm don't support the government giving money to the bad actors in this crisis, but Jone's assertion that majority of people who have been hit by the housing crisis are speculations who are making "rational decisions" is both naive and arrogant. Maybe that's the case in his neighborhood, but the picture Jone's presented today was way too narrow and too poorly presented. Listening to his interview was uninformative, aggravating and a waste of time. If I want to hear that, I'll turn on some commercial radio.

Jones calls himself an "economic activist", but he seems like another self-promoting blogger trying to make a buck and while creating noise and confusion. While he might be somewhat noteworthy for being a famous blogger, over all, his interview ran way too long and Brian let him ramble too much and didn't follow up with critical questions.

There's plenty of intelligent critics of the housing crisis that you shouldn't have to run such a poor interview this long. Find better guests next time if you want us to donate money, WNYC!

Oh and if you do visit Jone's website, make sure to use Adblock.

Oct. 24 2008 11:27 AM
Annoyed

While I do feel that there are problems with the way the housing crisis is being handled, I'm not impressed by this Ben Jones guy. His delivery on the radio on the radio is terrible and frankly it doesn't sound like he really knows what he's talking about.

Oct. 24 2008 11:25 AM
Kai from NYC

@ barry
I accept that the Clinton administration fully bought into the free market solutions that Greenspan (and Friedman as the theorist) put forward, but the fact is that it was the deregulation and risky speculation that the free market ideology that led us to this economic mess.

To be sure, many have been noticing over the past 30 years that the type of overheated financial "growth" that was being experienced was unsustainable. There were extreme distortions in a number of markets (ie, dot.com, housing) for all to see with the growing shares going directly to the top.
Unsustainable

Oct. 24 2008 11:06 AM
Taher from Croton on Hudson

This guy is right on. The pundits and people in the establishment box believed in their on BS. The real estate crisis looks like a Ponzi scheme.

Oct. 24 2008 11:05 AM
luvlux

Can we put off this whole borrowing crisis thingie until I buy the jacuzzi for the country house?

Not kidding.

Oct. 24 2008 11:04 AM
hjs from 11211

correction is right, the empire is over.
good luck

Oct. 24 2008 11:04 AM
smidely

greenspan's book quite deliciously came out a couple weeks after the debt-based economy began crumbling.

Oct. 24 2008 11:01 AM
Voter from Brooklyn

Wow! Great segment and guest.
I’m neither Republican nor “free-marketer”, but I agree with Barry on corrections. People bought into a fantasy and now the market is correcting itself. (And sadly, politicians who preach unfettered free markets are trying to stop the market from correcting) I think “poor” people buying houses they can’t afford has little to do with this (if it were just “poor” people, this wouldn’t be newsworthy.) This was caused by certain fallacies about the so called “Middle-Class” and their expectation of an unrealistic standard of living.
Now, when are people going to accept the same thing is happening with investment based retirement schemes…

Oct. 24 2008 10:58 AM
BORED

Barry I guess its back to the drawing board. Since your party has no ideas i guess the Greenspan attacks will begin real soon.

Oct. 24 2008 10:56 AM
ownership society man

bush did have 8 years to fix it, barry.

Oct. 24 2008 10:56 AM
Leo Queens from Queens

Barry From Manhattan: Why don't you come clean and tell us about your association or role with the criminal white collar mafia that took over our financial system ( our real estate values, pensions and investments!)

Oct. 24 2008 10:55 AM
Leo Queens from Queens

Barry - Greenspan was the one who used his power and 'experience' to block ALL efforts at oversight and accountability.
You think this man was so naive to think that greed has never played a role when people are trying to make money?

Also, think of Senator Gramm sneaking in a law to do away with any efforts to make Credit Default Swaps transparent or to be regulated like all other financial 'products'.

Oct. 24 2008 10:54 AM
inflationman!

if the fed just adds a zero to all our paychecks we can pay off dem lonze in no time! (best to buy gold and vittles 1st tho)

Oct. 24 2008 10:52 AM
barry from Manhattan

Apparently it is all Bushes fault. So congress would make you think. I mean with the attitude of congress at this point we are just going to make it worse by not addressing it.

Oct. 24 2008 10:51 AM
hjs from 11211

so who cashed in?

a lot of people got rich off this pyramid scheme and some got burned

Oct. 24 2008 10:50 AM
Jon from West Village

Can you get William Fleckstein back on? I think I bought his book because I heard him either on this or Leonard's show.(Greenspan's Bubbles).

Your guest is right.
Folks are still delusional -- the average person things everything is going to correct in a week or two -- they are going to get wiped out because they are getting advise to stay the course and they can't think for themselves.

If you haven't already taken action with your portfolios you've got your head in the sand.

Also -- why can't anyone remember the last real-estate bust. Or what happened to Lehman in the 80's, like what is going on here -- we're acting like this can't happen?

Oct. 24 2008 10:49 AM
Mike from NYC

@1 - Barry

You say use critical thinking, yet you cite two second-party interpretations as your sources. I've been working on Wall St for ten years, and if you think that this crisis is about poor people getting loans they defaulted on, you have no idea what your talking about. If every Acorn mortgage defaulted (and they didn't, they have the same default rate as the rest of the market) nobody would notice. This is about million dollar homes losing half their value overnight. The reason these mortgages were written had nothing to do with Congress but with an insane MBS boom.

Oct. 24 2008 10:49 AM
susy from manhattan

and, furthermore, i can't stomach the idea of buying these idiot's mortgages.

now i have to pay for those who don't know how to read fine print. i'd rather give my money to wall street than main street at this point.

Oct. 24 2008 10:49 AM
barry from Manhattan

Let the bad bets fail and at the same time cushion the fall.
We are going through a huge reset.
However the huge reset will be much quicker than in the past because the pace of change, (good and ill) is much much faster.
Should be interesting

Oct. 24 2008 10:48 AM
susy from manhattan

ahh. i'm so sick of people saying it was caused by republicans, democrats...whatever. the congress is made up of both parties.

basically, we, the citizens consistently buy into the idea that we can get something for nothing. foolish; partisan or not.

Oct. 24 2008 10:47 AM
barry from Manhattan

Here I am. I'm a Republican Free-marketer.
Guess what? The Free Market is now correcting itself.
Enjoy

Oct. 24 2008 10:45 AM
barry from Manhattan

Barney Frank should lead the way to prison
along with Bush for crap leadership

Oct. 24 2008 10:44 AM
ian from BROOKLYN

Brian, I bloged this on your board last week, ver batim. Please look for it.

Oct. 24 2008 10:43 AM
BORED

Where are all the republican "Freemarketers". Their God is dead so wat do they do now?

Oct. 24 2008 10:42 AM
barry from Manhattan

Why punish Greenspan?
Punish congress and the Senators who looked the other way!
Jeezzz

Oct. 24 2008 10:42 AM
barry from Manhattan

This is the congress that is going to partner with Obama to "fix" the economy.
Good luck guys

Oct. 24 2008 10:41 AM
Robert from NYC

And for his faith I think Mr Greenspan's punishment, in true Dantesque tradition, should be blinded! Suddenly they see. What crap and s/he who believes that should also be blinded.

Oct. 24 2008 10:40 AM
barry from Manhattan

He means the Clinton Administration gave them the green light to make risky loans.
Fannie and Freddy just handed out the money to the lenders

Oct. 24 2008 10:39 AM
Hugh Sansom from Crown Heights

Greenspan? Too little too late. This is a man who should lead the way for Wall Street liars to prison.

Another who got it right was Elizabeth Warren. But you don't have to be a professor or a professionally trained economist or accountant. Plenty of regular folks predicted this three, four, five years ago. ANYBODY familiar with the obscenity of New York City real estate could predict that such price increases CANNOT be sustained. SIMPLE MATHEMATICS.

Back to Greenspan. Many people tried to warn him. He was too blind, too dogmatic, too criminal to care. He belongs in prison.

Oct. 24 2008 10:38 AM
susy from manhattan

to me, the variables greenspan couldn't determine...even with all of his divine math were the human factors of greed and denial... it's just common sense to weigh those as well as the more statistical evidence.

Oct. 24 2008 10:38 AM
hjs from 11211

are we to believe the high priest greenspan doesn't understand the concept of greed?

Oct. 24 2008 10:37 AM
barry from Manhattan

The clips are selective. What Greenspan actually said was: "What went wrong with global economic policies that had worked so effectively for nearly four decades? The breakdown has been most apparent in the securitization of home mortgages."
Read it for yourself: http://oversight.house.gov/documents/20081023100438.pdf

Why did this happen? In the words of a well-respected Democrat: "This was a Congress-caused crisis, beginning during the Clinton administration, with Democrats leading the way into the crisis and blocking every effort to get out of it in a timely fashion."
Read it for yourself: http://www.ornery.org/essays/warwatch/2008-10-05-1.html

What Orson Scott Card says is all verifiable fact. Look into the CRA and look at Obama's involvement with it, Maxine Waters, Barney Frank, Franklin Raines, and see how the Republicans like Chris Shays and John McCain tried to put checks and balances into the corrupt FNM and FRE.

The fact is that the press is muddling your non-critical thinking and you are allowing them to. Please think for yourself and don't get your emotion-based conclusions from the media.

Oct. 24 2008 10:36 AM

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