November 29, 2007

The Maestro Speaks

Filed under: Economics — duncan @ 9:23 pm

Alan Greenspan, April 2005:

“Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country… Deregulation and consolidation have… cultivated the expansion of the financial services marketplace… With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers… Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortages outstanding, up from just 1 or 2 percent in the early 1990s.”

Alan Greenspan, September 2007:

”[T]his was an accident waiting to happen… [A] lot of the subprime lending has been frankly truly egregious and I think in many cases, criminal fraud.”

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