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Daily Real Estate News  |  July 19, 2005  |   Greenspan: Home Prices Aren't Fed Target The Federal Reserve won't use monetary or regulatory policy to cool housing prices and prevent the popping of what some commentators say is a housing bubble, Fed Chairman Alan Greenspan told U.S. Rep. Jim Saxton (R-N.J.) in a leter. "The regulatory system is not designed to influence or control asset bubbles, but rather to ensure that bubbles, should they develop, do not lead to unsafe lending practices," Greenspan says in the letter. Saxton, chair of the Joint Economic Committee of Congress, questioned whether recent guidance about risky mortgage products could be considered "regulatory suasion" and an alternative to higher interest rates as a means of tightening control of the market. Greenspan says no. The guidance to lenders about interest-only home-equity loans was triggered only by signs "that some banks were not appropriately managing risks in the home-equity area."

Source: The Wall Street Journal (07/19/05); Ip, Greg; Rebello, Joseph

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