Greenspan: I Was Wrong to Trust Banks

Fed's push for deregulation helped 'nnce-in-a-century credit tsunami'
By Kevin Spak,  Newser Staff
Posted Oct 23, 2008 11:51 AM CDT
Alan Greenspan testifies on Capitol Hill in Washington, Thursday, Oct. 23, 2008.   (AP Photo/Lawrence Jackson)
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(Newser) – Alan Greenspan made a mild mea culpa today as lawmakers grilled him on his role in a financial crisis the former Fed chief called a “once-in-a-century credit tsunami,” the Wall Street Journal reports. Asked if he was wrong to champion deregulation, Greenspan replied, “partially,” explaining he’d believed lending institutions were the ones in the best position to protect their shareholders’ interests.

The crisis “has turned out to be much broader than anything I could have imagined,” he said. “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.” But while Greenspan agreed there should be more regulation for credit-default swaps, he believes other derivative markets are working fine.