Give Troubled Borrowers Cash - Greenspan

"I'm saying instead of in effect 'taxing' financial institutions and giving the funds to the homeowners, we'd be far better off, as far as the future structure of our financial markets are concerned, to do it strictly with cash," former Fed Chairman said Tuesday in an interview with the Wall Street Journal. "Do it out in the open. Do it cleanly and with transparency, not by hidden processes." Greenspan was clarifying remarks made on ABC News's This Week that "cash is available and we should use that in larger amounts, as is necessary, to solve the problems," after which people were left wondering what exactly should be done with the cash.

"Emergency aid is what I'm talking about, similar to what government does in natural disasters," he said, adding those who qualify for "rate relief" under currently proposed measures would be the same ones that receive his suggested cash grants. Greenspan said giving money to borrowers facing foreclosure, rather than forcing banks to change the way they do business, "is far less damaging to the economy and far simpler, without the ongoing consequences for the markets." Greenspan is worried that if lenders are compelled to change the terms of outstanding mortgage contracts, it could erode their trust the system and impair market function. "If I'm a mortgage lender and I know my contracts with borrowers can be abrogated for political reason I will feel it necessary to charge a higher premium to offset that. Any time you undermine contract rights, there are consequences for risk premiums in the future," he said.

Additional Reading: Greenspan : Throw Cash At Mortgage Crisis • Greenspan : Large Losses Loom

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Comments

[oceandude:]

And Greenspan used to be a disciple of Ayn Rand? She is spinning in her grave.

Where does this cash come from? I guess it's a *slight* improvement if people get cash first instead of Fed -> Big Banks but whatever happened to personal responsibility? Oh yeah it died with FDR.

2007 Dec 19 02:56 PM

[tired of Gr...:]

Not to mention the fact that creating more money is essentially taxing everyone for the stupidity of some (including Greenspan).

2007 Dec 20 12:56 PM

[Devlin:]

So, not only would I be in a smaller home because I didn't take out of of these ridiculous loans that will have some sort of level of forgiveness, but I will also see my tax dollars go to waste on people who were making $40,000/yr and buying a $700K home. I guess our leaders are making it very clear that it doesn't pay to be responsible in this country anymore.....

With Greenspan coming up with plans like this, I can see why the country is a mess to begin with. From what I can see the 80's and 90's were just as messed up, but it was all hidden until you take a good look and unravel the magic curtain. This day was long in the making and the runaway train is far from stopping. Greenspan wants to use band-aids to stop a leak in the Hoover Dam!!

2007 Dec 20 02:36 PM

[gordon:]

Why are all reporters in the media COWARDS by not confronting Greenspan in his attempts to re-write history? HE ADVOCATED ARMs! Confront the idiot-liar PUBLICALLY! All you media are mostly cowards, leading the the erosion of democracy, most of you are too worried about losing access or your livelihood, I say, get the h out of journalism if you can't tell the truth. Not aiming at this writer, but media in general. A great example is by censorship of all news coming out of Iraq, the Bush Propaganda Machine has perpetrated a success and continuing the status quo in Iraq, I have not heard ONE JOURNALIST question this.

2007 Dec 20 03:11 PM

[Wisco:]

This is the dumbest "solution" yet.

2007 Dec 20 05:49 PM

[censeo:]

Why is anyone paying attention Ayn Greenspan?

2007 Dec 20 08:26 PM

[Kunst:]

This is all heading the same place. US taxpayers will take the fall. One way or another, our tax money will bail out the banks for sure, borrowers maybe.

2007 Dec 21 02:09 AM