CHICAGO (Reuters) - Alan Greenspan, when chairman of the Federal Reserve, brushed off an idea to boost scrutiny of subprime mortgage lenders, a former Fed governor told the Wall Street Journal.
In an interview published on Saturday, Edward Gramlich, who was a Fed governor from 1997 to 2005, said he proposed to Greenspan in or around 2000 that the Fed start sending examiners into the offices of consumer-finance lenders that were units of Fed-regulated banks.
“He was opposed to it, so I didn’t really pursue it,” said Gramlich, who said he raised the idea with Greenspan personally rather than going to the full board of governors.
Gramlich is now a senior fellow at the Urban Institute, a nonpartisan Washington-based research group.
Greenspan, who retired from the Fed in early 2006, told the Journal he did not recall a specific discussion on subprime lenders but would have been opposed to a crackdown.
“For us to go in and audit how they act on their mortgage applications would have been a huge effort, and it’s not clear to me we would have found anything that would have been worthwhile,” Greenspan said.
Subprime loans, typically made to borrowers with poor credit histories, have hurt the U.S. mortgage market in recent months as higher interest rates led to rising defaults and delinquencies.
Under new Chairman Ben Bernanke the Fed has started reviewing its oversight of holding-company units.