Greenspan: Housing Stabilizing Soon

Former Federal Reserve Chair Alan Greenspan in an interview with the Wall Street Journal this week says he expects U.S. home prices to stabilize in the first half of 2009.

"Stable home prices will clarify the level of equity in homes, the ultimate collateral support for much of the financial world's mortgage-backed securities. We won't really know the market value of the asset side of the banking system's balance sheet – and hence banks' capital – until then," he said.

Greenspan had a one-word description for the government’s response to Fannie Mae and Freddie Mac’s problems – “Bad.”

“[Congress] should have wiped out the shareholders, nationalized the institutions with legislation that they are to be reconstituted – with necessary taxpayer support to make them financially viable – as five or 10 individual privately held units," which the government would eventually auction off to private investors, he said.

Source: The Wall Street Journal, David Wessel (08/13/08)