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.
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Daniel Gross is the Moneybox columnist for Slate and the business columnist for Newsweek. You can e-mail him at moneybox@slate.com 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.