Greenspan trips the stock market with home-price warning

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If only he could keep his thoughts to himself.

Former Federal Reserve Chairman Alan Greenspan helped send the stock market reeling in the last half-hour of trading today, after he warned in a CNBC interview that the U.S. was living through a ‘once-in-a-century’ crisis tied to the housing market’s plunge.

He said falling home prices were ‘nowhere near the bottom,’ and he supported the idea of nationalizing mortgage giants Fannie Mae and Freddie Mac, saying they were a ‘major accident waiting to happen.’

Note, though, that this is the same Fed chairman who on June 13 said that ‘the worst is over in the financial crisis or will be very soon.’ Hopefully no one took that as a sign to buy bank stocks in mid-June.

Greenspan has, at least, been consistent on the home-price issue. On May 8 he said the housing crisis would go on ‘at least until the end of the year, if not [into] next year, before it gets rectified.’

When his latest comment about housing prices crossed the tape at 12:19 p.m. PDT today, the Dow Jones industrial average was off about 106 points. At the closing bell, 41 minutes later, the Dow was down 205.67 points, or 1.8%, to 11,378.02.

Fannie Mae slid 71 cents, or 5.8%, to $11.50; Freddie Mac lost 56 cents, or 6.4%, to $8.17. Both had been in positive territory earlier in the session.

The Dow, however, was in the red the entire session, after the latest economic data deepened concerns that the U.S. might not be able to avoid recession. (Greenspan opined that the odds of an official recession were ‘50-50.’ Way to hedge your bet, Mr. Chairman!)

Still, the Dow managed to eke out a 0.2% rise in July, only its second monthly increase since November. The broader Standard & Poor’s 500 index, which fell 1.3% today, was off 1% for the month. The Nasdaq composite, down 0.2% today, was up 1.4% for all of July.