Here is a link from 2002 to drop on him:
thestreet.com
"I see this as part of a series of warnings that Alan Greenspan has tried to deliver to Congress for several years now," said Peter Wallison, a resident fellow at the American Enterprise Institute for Public Policy Research.
"He's saying, if you're as interested as you seem to be in the risks that Enron created, then you should be equally interested in the risks that these GSEs [government-sponsored enterprises] are creating. You should not be complacent about what is occurring here."
Greenspan took aim at mortgage agencies Monday night, complaining about the risks associated with the quasi-government agency's derivatives deals.
...
Greenspan ... also expressed concern about the large interest-rate hedging efforts made by mortgage agencies such as Fannie Mae and Freddie Mac. The support being extended by the U.S. government to these companies could lead counterparties, or firms that the GSEs do business with, "to apply less vigorously risk controls that they apply to manage their over-the-counter derivative exposures," he said.
While counterparties should be able to manage this risk effectively, the perception of government support for these companies poses risks to the financial markets, he said.
The exact level of government involvement in GSEs is a matter of some debate. While set up by the government, they are shareholder owned and no guarantee of their credit is explicit. But it's customarily assumed by the market that the government wouldn't allow GSEs to fail, which lowers their cost of borrowing. |
