Alan Greenspan: ARMed and Dangerous
The Federal Reserve chairman's weird affection for adjustable-rate mortgages.
Strictly speaking, Greenspan is correct. If you borrow money while interest rates are falling, then an ARM is superior to a fixed-rate mortgage. But while homeowners may pay a little less with an ARM, they may wind up sleeping less when rates climb again—as they inevitably do. Man does not live by basis points alone.
Daniel Gross is the Moneybox columnist for Slate and the business columnist for Newsweek. You can e-mail him at firstname.lastname@example.org and follow him on Twitter. His latest book, Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation, has just been published in paperback.
Photograph of Alan Greenspan by Ira Schwarz/Reuters.