Alan Greenspan cashes out. A Fool? A Crook? or Maestro?
January 20, 2008
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Alan Greenspan aka "creator of Housing Bubble" cashes out and joins third hedge-fund to profit from housing collapse. The "Maestro" or a fool or a crook? What legacy does Greenspan leave? It makes me feel a little sorry for dollar destroying Helicopter Ben....
WSJ reporting:
Greenspan Will Join Paulson as an Adviser
"It is the third consulting contract Mr. Greenspan, 81 years old, has signed since leaving the Fed after 18 years as chairman in January 2006 and establishing his own company, Greenspan Associates"
Mr. Greenspan has said he would only consult with one client in each industry, and thus Paulson, with assets of $28 billion, is the only hedge fund he will work for directly. Still, all three of his clients have profited from a bearish view on housing and mortgages.
"Housing and mortgage markets have been of intense personal interest to Mr. Greenspan since the 1960s, and he devoted hours of personal and Fed staff research time to the subject. That could come in handy for Paulson. Last year, one of its credit hedge funds rose by about 590% thanks to bets that the housing market would weaken and that mortgages given to borrowers with sketchy credit would drop in value.
John Paulson, who founded the firm in 1994, lately has been making investments that he hopes will pay off if other kinds of consumer debt lose value, financial companies run into more problems and the overall economy slumps. In a late October presentation to investors, "The Worst Is Yet To Come," Mr. Paulson said the hedge fund anticipates lower housing prices, a decline in consumer spending, rising credit costs, and a slowdown in the economy so deep that lower interest rates might not help very much. His firm has been reducing its exposure to stock markets.
Mr. Greenspan helped fuel the housing bubble by keeping interest rates at 1% from 2003 to 2004, and then raising them too slowly. Mr. Greenspan has argued that low rates were necessary to eliminate the risk of dangerous deflation, or generally falling prices. He has also said global forces that held down long-term interest rates world-wide were the primary reason housing prices soared around the world. Yesterday, he said many of the criticisms of his record are simply wrong in diagnosing what caused the problems in housing and mortgage markets."
Greenspan Defends Himself:
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