MoneyNews
Monday, Feb. 13, 2006

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Former Federal Reserve Chairman Alan Greenspan pocketed a whopping $250,000 from Lehman Brothers to meet with 15 of the investment firm's most important clients Tuesday night.

Congress has extended the law for another two years and raised the level of federal government involvement from $5 million to $50 million. That figure will rise to $100 million in 2007.

Lehman paid $100,000 more than Greenspan's customary speaking fee of $150,000 for the privilege of being the first investment firm to book Greenspan, the New York Post reports.

Attendees at the dinner meeting in Lehman's executive dining room in New York were all from hedge funds, and included billionaire Paul Tudor Jones of Tudor Investment Corp., one of the market's most profitable hedge funds.

The former Fed chief told the Lehman clients that while the overheated U.S. housing market is cooling, evidence of it would not show up statistically for six months, attendees told the Post.

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At the private meeting Greenspan told those present that short-term U.S. interest rates might have to rise even further, according to a report from Bloomberg News.

Greenspan departed as Fed chairman on Jan. 31, but before doing so, he led the central bank in raising short-term rates dramatically – some 14 times – to a rate of 4.5%, the largest aggregate rate increase in two decades.

Greenspan and others had claimed the rate rises were implemented to cure inflation. But his private comments suggest the Fed was also concerned about the housing market bubble.

Editor's Note: Financial Intelligence Report detailed that Greenspan's actions would lead to a coming recession and housing bust. Read more. Go here now.

An unidentified participant at the private New York gathering related that Greenspan told an assembly of Lehman Brothers clients that low long-term rates were inhibiting the Fed's attempts to control the economy and that further rate hikes may be necessary as "homeowners are borrowing more against the value of their homes to finance spending."

But the ex-chairman was vague, failing to specify exactly how high rates would go.

Ominously, he indicated that the markets were underestimating just how much more tightening the Fed had to do. At the same meeting, Greenspan reportedly offered a positive view of the U.S. economy.

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