Jon G

If I've said it once, I've said it a million times: The Fed did not cause - and could not have prevented - the housing bubble. - Alan Greenspan in a WSJ op-ed

Nice editorial but consider the source (let me defend my legacy). I think when history is written, we all know where Greenspan will be in the blame list (right near the top). I think he saw the train coming down the tracks and pushed his pal Bernanke in front of it while he jumped (hoping to preserve his place in history as the maestro).

As the banker of the last resort, the Fed failed to respond to a massive bubble that they created. Recall shortly after Greenspan left, he said in a speech that history has not dealt kindly when risk premiums were so low. Risk premiums were so low from the wealth effect created by real estate prices. In addition, encouraging people to use option arms at the peak of the bubble as Mr Greenspan did was very irresponsible. To me this said, keep the game going until I can get out of here.

I can go on and on (allowing banks to lever up in a post Long-Term Capital environment - didn't they learn the lesson once?, not regulating derivatives and CMBS, etc, throwing money at any problem) but it will make me sick.