By Howard Gold, MarketWatch
1. Greenspan, Others Say There’s No Housing Bubble
No one got things more wrong than former Fed Chairman Alan Greenspan. His historically low interest rates, lackluster regulation of big banks, and advice that homeowners take adjustable-rate mortgages all rank among the biggest mistakes made since 2000.
But one was particularly egregious. ““Although a ‘bubble’ in home prices for the nation as a whole does not appear likely,” he told a congressional committee in June 2005, “there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels.”
“The U.S. economy has weathered such episodes before without experiencing significant declines in the national average level of home prices,” he continued. “…These declines, were they to occur, likely would not have substantial macroeconomic implications.”
Wrong, wrong, and wrong again. But Greenspan wasn’t alone. Many big-name economists (mostly conservatives, it seems) also were in denial about the bubble, including Alan Reynolds, Kevin Hassett, James Glassman, the late Jude Wanniski, Brian Wesbury, and Larry Kudlow.
The 21st century has more than 80 years to go. But it will be a long, long time before so many prominent people are so wrong, with such disastrous consequences.
