Greenspan: Housing bubble caused by fixed-rate mortgage rates

Writing in a Wall Street Journal commentary, former Federal Reserve Chairman Alan Greenspan defends his tenure and says central bank policies did not create the housing bubble that led to the current financial crisis. He blames the speculative euphoria on declining long-term, fixed-rate mortgage rates and notes that the correlation between long-term mortgage rates and the federal funds rate, which historically had been close, diminished to insignificance between 2002 and 2005. "This correlation between home prices and mortgage rates was highly significant, and a far better indicator of rising home prices than the fed-funds rate," Greenspan writes.

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