Some are beginning to lay the blame for the subprime mess at the feet of former Fed boss Alan Greenspan. David Moon, Moon Capital Management president is one of them. Moon told CNBC's Melissa Francis that Greenspan on "at least two different public occasions" said that people would be better off with adjustable rates and that the mortgage industry is capable of assessing the risk of subprime borrowers. Moon says Greespan'd commnets confirmed what the "Fed had been doing for four years," namely "loosening reserve requirements."
Anthony Chan, JP Morgan Private Client Services managing director & chief economist, disagrees. In his view, Greenspan was saying that consumers think of 30-year mortgages as "an insurance policy to lock in a rate" but rarely need it because of they change homes withing a few years; thus, adjustable rate mortgages made more sense. Chan also rejected claims that the Fed was lowering rates "for the benefit of the housing sector."
As the raging debate over the health of the housing continued, Congress mad another stab at understanding the problem, calling industry experts to testify for the second week in a row.
The head of the Mortgage Bankers Association Tuesday testified before a House panel looking into the subprime housing mess, telling lawmakers some lenders had made mistakes and that regulations needed to be revised.
John M. Robbins told the U.S. House of Representatives’ Financial Services Committee’s Subcommittee on Financial Institutions and Consumer Credit that "bad loans were made. They were not made responsibly or with the best interest of consumers in mind.”
Robbins also said poor pricing transparency and a complicated closing process were also to blame. "The mortgage market is desperate for a rewrite of the nation’s settlement laws and a strong uniform lending standard to trap predators and bring them to justice.”
The Senate Banking Committee held hearings the week of March 19.