Very soothing. AG's 12/19 speech actually contains several rounds of Greenspan-D'Arista Smackdown, including his response to the idea of using regulatory tools to slow the credit expansions that breed bubbles. I can't remember any time in recent years when Father Greenspan has been quite so defensive in public (first the Jax Hole speech, now this) -- or when the Fed has seemed so Out There in its reassurances (in announcing its 50 bp cut last month, the FOMC claimed that "with this action...the risks are balanced"). TS
In a message dated 12/20/2002 12:55:25 PM Eastern Standard Time, [EMAIL PROTECTED] writes: << [EMAIL PROTECTED] wrote: >Mortgage debt-service burden for Q4 2001-Q3 2002 ties the burden recorded in >Q4 1990-Q3 1991 as the highest ever for four consecutive quarters This just in from St Alan - don't worry about it! <http://www.federalreserve.gov/boarddocs/speeches/2002/20021219/> >A full enumeration of the caveats surrounding the economic outlook >would, as usual, be lengthy. But often-cited concerns about the >levels of debt and debt-servicing costs of households and firms >appear a bit stretched. The combination of household mortgage and >consumer debt as a share of disposable income has moved up to a >historically high level. But the upward trend in the series >reflects, in part, financial innovations that have increased access >to credit markets for many households. These innovations include the >development of a deep secondary market for home mortgages, along >with the advent of credit scoring and automated underwriting models >that have enhanced the ability of loan officers and credit card >companies to identify good credit risks. These innovations lower the >risk level of any given amount of debt. > >To be sure, the mortgage debt of homeowners relative to their income >is high by historical norms. But, as a consequence of low interest >rates, the servicing requirement for that debt relative to >homeowners' income is roughly in line with the historical average. >Moreover, owing to continued large gains in residential real estate >values, equity in homes has continued to rise despite very large >debt-financed extractions. Adding in the fixed costs associated with >other financial obligations, such as rental payments of tenants, >consumer installment credit, and auto leases, the total servicing >costs faced by households relative to their income appears somewhat >elevated compared with longer-run averages. But arguably they are >not a significant cause for concern. > >Some strain from corporate debt burdens became evident as rates of >return on capital projects financed with debt fell short of >expectations over the past several years. While overall debt has not >been paid down, corporations have significantly increased holdings >of cash and have reduced their near-term debt obligations by issuing >bonds to pay down commercial paper and bank loans. >>
