Alan Greenspan, the former chairman
of the Federal Reserve, vigorously sought to defend his record as he faced a
tough round of public questioning on Capitol Hill about his role in sowing the
seeds of the financial crisis.
In a spirited back and forth, Phil
Angelides, the former California state treasurer who leads the Financial Crisis
Inquiry Commission, asked Mr Greenspan if the Fed’s failure to curb subprime
lending as the housing bubble unfolded fell into the category of “oops”.
“My view is, you could have, you
should have and you didn’t,” Mr Angelides said.
Mr Greenspan, 84, led the Fed
between 1987 and 2006 and has been criticised for helping foster the conditions
that led to the collapse of the US mortgage markets and ultimately the global
financial crisis two years after his departure.
Although Mr Greenspan admitted that
he had made some mistakes, his tone was combative throughout the hearing. “In
the business I was in, I was right 70 per cent of the time, but I was wrong 30
per cent of the time”, he said. “What we tried to do was the best we could with
the data that we had.”
In response to a question from
Peter Wallison, a commissioner, Mr Greenspan said that Congress would likely
have blocked any attempt by the Fed to rein in the subprime mortgage industry
since it was bolstering homeownership across the country. He said lawmakers
were now suffering from “amnesia” about their stance on the issue.
”If the Fed as a regulator had
tried to thwart what everyone perceived as an unmitigated good, then Congress
would have clamped down on us,” Mr Greenspan said.
Mr Greenspan added his voice to the
debate in Washington over financial reform, saying that setting higher capital
and liquidity requirements for banks and increasing collateral requirements for
globally-traded financial products would help prevent the worst effects of
future crises saying, “if capital and collateral are adequate, and enforcement
against misrepresentation is enhanced, losses will be restricted to equity shareholders
. . . Taxpayers will not be at risk.”