Greenspan Admits “Mistakes”
Former Fed Chairman Alan Greenspan admitted yesterday he had made “mistakes” that led to a “once-in-a-century credit tsunami” that continues to shake the financial world with no end in sight.
“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.
Greenspan admitted that his opposition to regulation on derivatives, going as far back as 1994, was part of the problem. The Fed’s slashing of interest rates from 2001 – 2004 helped to create a housing bubble, and Greenspan brushed aside concerns of the market bursting because housing prices never experienced a national decline. Greenspan told the Committee that credit default swaps, an unregulated “insurance policy” on derivatives, needed to be reigned in as well.