Fed Head

The Wall Street Journal reported today (‘Greenspan Issues Another Warning on Fannie, Freddie’, by John D. Mckinnon and Dawn Kopecki; September 15, 2005)’ that Fed Head Alan Greenspan has issued another warning about the dangers of Fannie Mae and Freddie Mac’s portfolio’s in a letter addressed to Senator Robert Bennett (R., Utah).

To read the letter:
http://online.wsj.com/public/resources/documents/Greenspan091505.pdf

Clearly Greenspan is fretting;

" As Fannie and Freddie increase in size relative to the counterparties for
their hedging transactions, the ability of these [companies] to quickly
correct the inevitable misjudgments inherent in their complex hedging
strategies becomes more difficult."

"In the case of [Fannie Mae and Freddie Mac], excessive caution in reducing
their portfolios could prove to be destabilizing to our financial system as a
whole and in the end could seriously diminish the availability of home mortgage
funds."

Greenspan should stop pointing the finger and go to the public confessional. We have consistently pointed out the Housing Bubble and the accompanying financial risks, aka the mortgage backed market for repackaged mortgages, is due to the Fed Head’s bailout policy and low interest rate policy.

Greenspan senses the risks posed by his policy and continues to look to blame others for his own mistakes.

Time to own up AL!