April 23 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the share of consumer spending that Americans funded from extracting cash from the value of their homes doubled in the five years to 2005.

The portion increased to 2.1 percent in 2005 from about 1 percent in 2000, Greenspan said in a research paper written with Fed economist James Kennedy, released today by the central bank. Homeowners took out an average of $1 trillion in cash from home equity annually during the period.

The estimates are among hundreds of data compiled by Greenspan and Kennedy to help economists understand how Americans have used cash derived from selling their homes, taking out home equity loans and refinancing their mortgages. At the same time, Greenspan avoided taking sides over whether the extra cash from rising home values has actually increased consumer spending.

Greenspan noted that while JPMorgan Chase & Co. economists find that mortgage equity didn't cause an increase in consumer spending, Goldman Sachs Group Inc. analysis concluded it had a ``statistically significant and economically large effect on consumer spending.''

``Given JPMorgan's view that equity extraction is not a fundamental determinant of consumer spending, I don't find anything there that contradicts that,'' said Michael Feroli, an economist at JPMorgan in New York who used to work at the Fed. ``On the other hand, I'm sure if you were someone who believed it does have a big effect, you would probably say everything here is consistent with that view as well.''

Greenspan Research

Today's paper is a follow-up to research by Greenspan and Kennedy in 2005 that showed that extraction of home equity accounted for about four-fifths of the increase in mortgage debt. That paper was Greenspan's first since 1996.

Including repayment of non-mortgage debt, such as credit card loans, the cash financed 2.9 percent of consumer spending from 2001-05 compared with 1.1 percent from 1991-2000, the authors said.

Since Greenspan, 81, retired from the Fed in January 2006, he has been giving paid talks to investor and industry groups and writing a book, ``The Age of Turbulence,'' set for release in September.

In February and March, Greenspan roiled financial markets with predictions of a possible U.S. recession this year, placing a ``one-third probability'' of such an occurrence.

With today's research paper on the phenomenon of ``equity extraction,'' though, the former Fed chief is trying to steer clear of any controversy. Some critics say Greenspan held interest rates too low for too long after the 2001 recession, helping inflate home-price bubbles around the country that are now popping and threatening to torpedo the economic expansion.

Greenspan declined to comment for this article.

The data may help economists better grapple with questions of how the housing slump will affect consumer spending.

Americans derived an average $997.4 billion in cash a year from 2001 to 2005 through home sales, home-equity loans and refinancing loans, Greenspan and Kennedy estimated. The amount rose to $1.43 trillion in 2005, more than double 2001's $626.9 billion. About two-thirds of the cash came from home sales.

Greenspan and Kennedy also analyzed the effect of home equity extraction on the personal saving rate, which dropped from 1998 to 2004 and turned negative in 2005.

Greenspan's new data suggest that the saving rate was little changed from 1998 to 2004 after adjusting to remove consumer spending and non-mortgage debt repayment from home-equity extraction. Yet in 2005 and 2006, Greenspan's adjusted saving rate fell in tandem with the official data.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.

Last Updated: April 23, 2007 15:11 EDT