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Night Owl - Knowledge is the Past. Wisdom is the Future.
Saturday, March 6, 2004
Al the Pal
Bill Fleckenstein, a hedgefund manager in Seattle, writes a tough column about Alan Greenspan, excoriating him for his recent comments about the Housing Market:
So the most irresponsible central banker in the history of the world created the biggest bubble in the history of the world, which had disastrous consequences for the stock market and the economy. In order to ameliorate that, he has created bubble-like conditions and absurd financing schemes in real estate.
Here's the kicker.
Meanwhile, we've seen an enormous concentration of risk develop inside the financial system: We are down to just a handful of big banks and government-sponsored entities that are using his other favorite toy, derivatives, to theoretically manage away all their risks.
I think he's saying that because the increasing risk associated with the Housing bubble (driven by mortgage refinancing and other borrowing practices) is concentrated among only a few big lenders, rather than spread among many smaller financial institutions, a collapse could trigger a 'disaster' for the nation's economy as large bank positions crumble. Basically, S&L on steroids.

I hope he's wrong.

Posted by Night Owl at 8:25 PM PST
Updated: Thursday, March 11, 2004 8:28 PM PST

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