Greenspan Sees Bottom in Housing, Criticizes Bailout

Wall Street Journal (08/14/08) P. A1; Wessel, David
Former Federal Reserve chairman Alan Greenspan disagrees with the federal government's bailout of Fannie Mae and Freddie Mac, adding that he expects U.S. home prices to begin stabilizing during the first six months of 2009. The economist insists that an end to declining residential prices is important not only to American homeowners, but is "a necessary condition for an end to the current global financial crisis." Greenspan's housing forecast is based on two sources of data, the first of which is the supply of vacant, single-family homes for sale; the second is a comparison of the current price of houses--he personally prefers the quarterly S&P Case Shiller National Home Price Index--with the U.S. government's estimate of what it costs to rent a single-family residence. Greenspan calls the Bush administration to task for its handling of the trouble at Fannie Mae and Freddie Mac, stating, "They 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."