allan greenspan's role in the subprime crisis:

FT.com / Comment & analysis / Analysis - A global outlook

"This global analysis lies at the heart of his explanation of what caused the housing bubble that emerged during his watch as Fed chief. Mr Greenspan says the housing bubble was ??fundamentally engendered by the decline in real long-term interest rates? caused by a cascade of surplus savings from fast-growing emerging market economies such as China. The fall in long-term rates provided the initial gain in house prices that unleashed later speculative activity. He blames human nature ?? though he talks about ??euphoria? rather than ??greed?. To his critics, who argue that the Fed fuelled the bubble by keeping interest rates too low for too long in the early 2000s, this is an exercise in passing the buck. "

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as late as 2005, greenspan was pimping subprime loans to the low income segment of the market...THANKS AL!

FRB: Speech, Greenspan--Consumer finance--April 8, 2005

*edited for brevity*

Remarks by Chairman Alan Greenspan
Consumer Finance
At the Federal Reserve System�s Fourth Annual Community Affairs Research Conference, Washington, D.C.
April 8, 2005

It is a pleasure to be here today as you conclude your discussions about our dynamic consumer finance market. Our nation's vibrant financial services industry is remarkable in many respects, with myriad providers offering consumers a broad range of transaction and credit options. The industry is central to the functioning of our robust consumer sector. Therefore, it is essential that policymakers, regulators, bankers, researchers, and consumer groups remain fully engaged in monitoring developments in the consumer finance market and continually seek to better understand the strengths and weaknesses of the financial services industry, including how well it serves lower-income and underserved consumers.

A brief look back at the evolution of the consumer finance market reveals that the financial services industry has long been competitive, innovative, and resilient. Especially in the past decade, technological advances have resulted in increased efficiency and scale within the financial services industry. Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country.

The development of a broad-based secondary market for mortgage loans also greatly expanded consumer access to credit. By reducing the risk of making long-term, fixed-rate loans and ensuring liquidity for mortgage lenders, the secondary market helped stimulate widespread competition in the mortgage business. The mortgage-backed security helped create a national and even an international market for mortgages, and market support for a wider variety of home mortgage loan products became commonplace. This led to securitization of a variety of other consumer loan products, such as auto and credit card loans.

Deregulation and consolidation have also cultivated the expansion of the financial services marketplace, as evidenced by the proliferation of many nonbank entities that provide the credit and transaction services that were once mainly the province of depository institutions.

As has every segment of our economy, the financial services sector has been dramatically transformed by technology.

With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. The widespread adoption of these models has reduced the costs of evaluating the creditworthiness of borrowers, and in competitive markets cost reductions tend to be passed through to borrowers. Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s.

Improved access to credit for consumers, and especially these more-recent developments, has had significant benefits. Unquestionably, innovation and deregulation have vastly expanded credit availability to virtually all income classes. Access to credit has enabled families to purchase homes, deal with emergencies, and obtain goods and services. Home ownership is at a record high, and the number of home mortgage loans to low- and moderate-income and minority families has risen rapidly over the past five years. Credit cards and installment loans are also available to the vast majority of households.

As we reflect on the evolution of consumer credit in the United States, we must conclude that innovation and structural change in the financial services industry have been critical in providing expanded access to credit for the vast majority of consumers, including those of limited means. Without these forces, it would have been impossible for lower-income consumers to have the degree of access to credit markets that they now have.