Greenspan on Subprime Risk, Housing Prices

Last week, Former Federal Reserve Chairman Alan Greenspan there was a risk that rising defaults in subprime mortgage markets could spill over into other economic sectors.

Greenspan said the ongoing housing downturn appeared to stem more from:

• the recent stagnation in housing prices after years of appreciation
  

than from

• a decline in mortgage quality
  

but said he was not downplaying problems in so-called subprime loans.

If home prices keep falling, he warned, there could be more of an impact on the broader economy's momentum. Consumer spending fuels two-thirds of national economic activity.

Source: CNN Money