Charles Payne

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Yesterday, we got closer to the day of reckoning where the Federal Reserve finally starts to hike interest rates. It is the moment of truth, which was momentarily greeted yesterday, and will trigger more selling both before and after accommodation is removed. The knee-jerk reaction will be hastened by the way the Fed goes about this task. I hope they are not held hostage by Wall Street crybabies taking tiny steps like Alan Greenspan, whose view of the job as Fed Chair went from sage to cheerleader.
In the aftermath of the 9-11 attacks and harsh recession, Greenspan focused on housing as the tool to turn the economy around. What happened instead was punk job creation for the mother of all housing bubbles. Exacerbating the situation further was how the housing market was being fueled. I admit, I thought we were due for a run-of-the-mill housing correction, but it was a once-in-a-lifetime correction. Greenspan should have caught this beast before it was too late, but how could he? It was his creation.
His mistakes included:

  • Approved and encouraged exotic mortgages that became toxic mortgages
  • Overlooked massive regulatory issues and violations
  • Kept rates too low for too long, and slow walked them higher

Federal Reserve “Slow Walk”

Action

Rates Year End

2003

Final rate cut June 25 bps

1.00

2004

Five rate hikes

2.25

2005

Eight rate hikes

4.25

2006

Four rate hikes

5.25


Charles Payne

Charles V. Payne is a regular contributor to the Fox Business and Fox News Networks. He is also the Chief Executive Officer and Principle Analyst of Wall Street Strategies, Inc. (WSSI), founded in 1991 which provides subscription analytical services to both individual and institutional investors.