NYTimes. I have always thought the best thing that could have been done to limit the stock bubble was to increase margin requirements (most of my financial industry friends didn't think the Fed had the power, they do). Here is what Greenspan said earlier in the cycle:
In September 1996, at a meeting of the Federal Open Market Committee, he told his colleagues, “I recognize that there is a stock market bubble problem at this point.” And he had a solution: “We do have the possibility of . . . increasing margin requirements. I guarantee that if you want to get rid of the bubble, whatever it is, that will do it.” Yet he never did increase margin requirements, that is, require investors to put up more cash when buying stocks.
Of course, it is history now that Greenspan never increased margin requirements. He now says it wouldn't have worked. What gall! [John Robb's Radio Weblog]