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I think that's a fair statement. He said all of the mathematical models that he used in the last 40 years couldn't predict this happening. And he's absolutely right. You can't really blame the guy for just being who he was. Blame Reagan for selecting him. 
http://www.theaustralian.news.com.au...-36418,00.html
http://www.theaustralian.news.com.au...-36418,00.html
Greenspan admits to some mistakesFont Size: Decrease Increase Print Page: Print Brian Blackstone | October 24, 2008
GRILLED by lawmakers examining the causes of the financial crisis, former Federal Reserve chairman Alan Greenspan has admitted some mistakes in assumptions about deregulation while rejecting the idea that he is personally responsible for what he termed a "once-in-a-century credit tsunami".
In testimony to the House Government Oversight Committee, Mr Greenspan acknowledged that the crisis "has turned out to be much broader than anything I could have imagined. It has morphed from one gripped by liquidity restraints to one in which fears of insolvency are now paramount."
"Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity (myself especially) are in a state of shocked disbelief," according to Mr Greenspan.
The panel chairman, Henry Waxman, criticised Mr Greenspan's approach to mortgage regulation while he was Fed chairman. The Fed "had the authority to stop the irresponsible lending practices that fuelled the sub-prime mortgage market," Mr Waxman said, but Mr Greenspan "rejected pleas that he intervene".
Huse representative John Yarmuth hit Mr Greenspan even closer to home, calling the avid baseball fan one of "three Bill Buckners," a reference to the infamous Red Sox first baseman whose flubbed handling of an easy grounder cost the Red Sox the 1986 World Series.
Former Treasury Secretary John Snow and SEC head Christopher Cox, who both testified along with Mr Greenspan, also got tagged with that comparison.
However, Mr Greenspan said he raised concerns about the dangers of the "underpricing of risk" as early as 2005.
But when Mr Waxman pressed "were you wrong" about the benefits of deregulation, Mr Greenspan responded, "partially". The "flaw" in the assumptions he had over four decades, Mr Greenspan said, was that lending institutions themselves were best able to protect the interest of their shareholders.
Thus what looked like a solid edifice to his thinking broke down, Mr Greenspan said.
Mr Greenspan said there should be more regulation of credit default swaps, but also noted that excluding those instruments, the derivatives market was functioning well.
Mr Greenspan also said policy makers would have to address the "too big to fail" question - the idea that certain firms have such a wide effect on markets and the economy that the government would never let them go under.
There needs to be something that "penalises" firms that broach that threshold to avoid giving them an unfair advantage over smaller rivals, Mr Greenspan said.
Turning to the economic outlook, Mr Greenspan suggested the financial crisis currently gripping the US would take many months to improve, meaning higher unemployment and softer consumer spending was likely ahead.
"Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment," Mr Greenspan said in the text of prepared testimony to the US House Government Oversight and Reform Committee.
That, in turn, "implies a marked retrenchment of consumer spending as households try to divert an increasing part of their incomes to replenish depleted assets, not only in their 401Ks but in the value of their homes as well," Mr Greenspan said.
While Mr Greenspan assured lawmakers that "this crisis will pass" and that the US would end up with a "far sounder financial system," he warned that it won't come quickly.
Mr Greenspan said a "necessary condition for this crisis to end is a stabilisation of home prices”.
"At a minimum, stabilisation of home prices is still many months in the future," he said.
Dow Jones Newswires
GRILLED by lawmakers examining the causes of the financial crisis, former Federal Reserve chairman Alan Greenspan has admitted some mistakes in assumptions about deregulation while rejecting the idea that he is personally responsible for what he termed a "once-in-a-century credit tsunami".
In testimony to the House Government Oversight Committee, Mr Greenspan acknowledged that the crisis "has turned out to be much broader than anything I could have imagined. It has morphed from one gripped by liquidity restraints to one in which fears of insolvency are now paramount."
"Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity (myself especially) are in a state of shocked disbelief," according to Mr Greenspan.
The panel chairman, Henry Waxman, criticised Mr Greenspan's approach to mortgage regulation while he was Fed chairman. The Fed "had the authority to stop the irresponsible lending practices that fuelled the sub-prime mortgage market," Mr Waxman said, but Mr Greenspan "rejected pleas that he intervene".
Huse representative John Yarmuth hit Mr Greenspan even closer to home, calling the avid baseball fan one of "three Bill Buckners," a reference to the infamous Red Sox first baseman whose flubbed handling of an easy grounder cost the Red Sox the 1986 World Series.
Former Treasury Secretary John Snow and SEC head Christopher Cox, who both testified along with Mr Greenspan, also got tagged with that comparison.
However, Mr Greenspan said he raised concerns about the dangers of the "underpricing of risk" as early as 2005.
But when Mr Waxman pressed "were you wrong" about the benefits of deregulation, Mr Greenspan responded, "partially". The "flaw" in the assumptions he had over four decades, Mr Greenspan said, was that lending institutions themselves were best able to protect the interest of their shareholders.
Thus what looked like a solid edifice to his thinking broke down, Mr Greenspan said.
Mr Greenspan said there should be more regulation of credit default swaps, but also noted that excluding those instruments, the derivatives market was functioning well.
Mr Greenspan also said policy makers would have to address the "too big to fail" question - the idea that certain firms have such a wide effect on markets and the economy that the government would never let them go under.
There needs to be something that "penalises" firms that broach that threshold to avoid giving them an unfair advantage over smaller rivals, Mr Greenspan said.
Turning to the economic outlook, Mr Greenspan suggested the financial crisis currently gripping the US would take many months to improve, meaning higher unemployment and softer consumer spending was likely ahead.
"Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment," Mr Greenspan said in the text of prepared testimony to the US House Government Oversight and Reform Committee.
That, in turn, "implies a marked retrenchment of consumer spending as households try to divert an increasing part of their incomes to replenish depleted assets, not only in their 401Ks but in the value of their homes as well," Mr Greenspan said.
While Mr Greenspan assured lawmakers that "this crisis will pass" and that the US would end up with a "far sounder financial system," he warned that it won't come quickly.
Mr Greenspan said a "necessary condition for this crisis to end is a stabilisation of home prices”.
"At a minimum, stabilisation of home prices is still many months in the future," he said.
Dow Jones Newswires
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