Here is a nice look into Mr. Greenspan's slight of hand from the Mises Institute: Greenspan's Bogus Defense by Robert Murphy.So it's true, the red and blue lines in the chart above moved pretty much in lockstep up until 2002, as Greenspan claimed. But the disconnect occurred when Greenspan slashed short-term rates while mortgage rates held steady. Since the participants in the mortgage market wisely realized that rates wouldn't be held at 1% forever, they didn't foolishly drop their own yields down so far. Then in June 2004, when Greenspan began ratcheting the federal-funds rate back up, it is perfectly understandable that mortgage rates wouldn't rise with them.
Lest anyone forget one of the major players in the current disaster.
