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Greenspan Put |
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Greenspan Put A term coined in the late 1990s describing Federal Reserve chairman Alan Greenspan's loose monetary policy. Throughout this period, Greenspan and the Fed kept interest rates rather low to encourage growth in the stock markets. Investors assumed from this policy that stocks would continue to rise and, thus, they could enter long positions and sell them at a higher price on or before a certain date, creating a put option in practice, if not in contract. While this was likely not the intent of the Federal Reserve at this time, investors used this investment strategy anyway. See also: Irrational exuberance. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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| As Federal Reserve Chairman Alan Greenspan put it in congressional testimony in early 2004, "The problem that exists is because they have a subsidy, granted not by the Congress but by the expectation that government will bail them out in the event of a crisis. But given their track record in predicting prices, it's not clear why Greenspan puts so much faith in them. In a speech he gave in March 2002, Federal Reserve Board Chairman Alan Greenspan put the issue in a nutshell. |
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