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Letter to the WSJ

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February 27, 2004

Isn’t it shameful enough for Alan Greenspan that his recklessly expansionary monetary policy to keep financial markets afloat has, by pushing interest rates to historically low levels, inexorably led to the much lamented over-indebtedness in the economy? Now the long suffering American taxpayer, saver-investor, and homeowner must endure his hectoring (“Fed Chief Questions Loan Choices,” Feb. 24) for taking advantage of the situation to lock in Fed-suppressed mortgage rates against the increasingly likely prospect that they will rise in the future. In the interest rate environment Mr. Greenspan himself has created, the only sensible strategy for homeowners is to let banks and other mortgage holders, such as Fannie Mae and Freddie Mac, bear the considerable financial risk of rising rates. The “very serious” risks these behemoths pose to financial markets that Mr. Greenspan warns against (“Mortgage Giants Pose High Risk, Greenspan Warns,” Feb. 25) is in no small part a result of his own loose monetary policy. While Congress is taking his advice to reign in Fannie and Freddie, it should bridle the Fed as well.

Jeffrey M. Herbener

Professor of Economics

Grove City College Grove City, Pennsylvania

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