Alan Greenspan On QE2, Foreclosures And The Economic Recovery (F, V, MA)

During an interview with CNBC this morning, Alan Greenspan spoke about QE2, foreclosures and the economic recovery.

“I am assuming that the foreclosures will begin to slow down,” he said. “But the problem we've had is such a large proportion of sales are distressed sales.”

Greenspan also said that we won't know if QE2 was a good move until after the cycle.

“You can't look at [only] the expansion phase; you have to look at the expansion and the contraction phase,” he said. “I incidentally work very hard to get the numbers on this issue.”

Greenspan said that his original diagnosis seems to be coming out pretty well. “What has happened in the last six months or so is that the degree of activism has gone down,” he said. “There's a lot of talk but there hasn't been a great deal of Cash for Clunkers or housing credits.”

The one thing he's almost certain of, Greenspan said, is that the Dodd-Frank bill was “very specific in telling regulators what it is they wanted to happen in the marketplace.” “And they said, let's do this, and you regulators figure out how to do it,” Greenspan said. “Now, I look at the whole series of mandates and I think some of them [are contradictory].”

Greenspan gave an example of the potential issues that could arise. “Is the issue of potential liability on the credit rating agency?” he asked. “What happens is Ford decides it wants to do an asset-backed security to finance car sales, and they could not get a credit agency to certify it. So what happened, there was an exchange of letters between Ford F and the SEC and the SEC decided to suspend it. That's the tip of the iceberg.”

Another issue “emerged with Visa V and MasterCard MA” and the fees that they charge, Greenspan said. “This is only the beginning.”

Greenspan also noted that the Fed has close to 200 regulatory rulings.