April 7th, 2010
07:26 PM ET

Greenspan: 'I was right 70 percent of the time'

Alan Greenspan acknowledged Wednesday that mistakes were made during his long tenure as chairman of the Federal Reserve, but he argued that the low interest rate policy he championed at the central bank didn't inflate the housing bubble.

In testimony before the Financial Crisis Inquiry Commission, Greenspan said the recent financial meltdown was possibly "the most severe in history." He admitted that regulators failed to grasp the severity of the crisis, but he maintained that his policies and predictions were correct most of the time.

"When you've been in government for 21 years, as I have been, the issue of retrospect and what you should have done is a really futile activity," Greenspan said. "I was right 70% of the time. But I was wrong 30% of the time, and there were an awful lot of mistakes in 21 years," he added.

Greenspan, who was chairman from 1987 to 2006, has been criticized for not increasing the Fed's benchmark interest rate in time to prevent the housing market from becoming overheated. The housing bubble eventually burst in 2008, giving rise to a wave of foreclosures, which roiled the financial markets and plunged the economy into a deep recession.

Read the full CNNMoney.com story

soundoff (25 Responses)
  1. BaghdadBob

    There were a lot of people really loving Greenspan when it seems the economy was going great and many people were enjoying spending the money they didnt have and buying the house they knew they had no wiggle room on the payments living right on the edge of their earnings. I wonder if those are the same people blaming him now?

    April 8, 2010 at 1:16 am | Report abuse |
  2. Mikefunnyman

    Greenspan was primarily interested in keeping the housing boom going. Interest rates were tweaked downwards just to keep the boom going. Fiscal prudence was never his agenda and all he seemed fixated in was growth, growth and more growth. The average man in the street just had to make a plunge to have that home. Car buyers just continued their buying spree with super low interest rates. I would quantify a 70% failure figure against his 30%. When he knew it was about to blow up, he conveniently left his position to retire, only to reappear as an expert in some investment bank. Like Bush, he will be remembered for all the wrong doings.

    April 8, 2010 at 1:32 am | Report abuse |
  3. ceaser

    If my memory serves me correctly,Mr. Greenspan said towards the end of the 1st 4yrs of GWB that "the free ride is over".I have since concluded that what he meant was that the rich had sucked as much money out of the system as they dared and that the poor would have all they could handle paying off the debt.In there greed the rich refused to listen and so here we are.

    April 8, 2010 at 2:55 am | Report abuse |
  4. Candace

    Any economist would have agreed with Mr Greenspan's actions. His policies were not flawed, Let us put the blame where it must go. The greedy mortgage lenders that gave people mortgages they knew could not afford them in the long run. The people who thought they could afford a home when in the past, where loan requirements were strict (not everyone can own a home), were also at fault. When it sounds like it’s too good to be true, it’s because it is. With such a huge amount, you have to do your homework.

    The instant gratification phenomenon is what fuels the US and some other parts of the world’s debt situation. When are we going to tell ourselves “I can’t afford this right now” instead of “Let me just put on the credit card”. If we don’t deal with it now. It will blow up in our faces later, maybe with even bigger repercussions. So this is not Greenspan’s fault or mistake. The whole housing bubble was a culmination of greed, uneducated homeowners (in financial terms), a speculative market (in some areas) and the lack of a Federal Watch Dog to oversee all this craziness. The guilty people who are now living the rich life at the expense of those who have or in the midst of losing their homes, shame on you!

    April 8, 2010 at 6:12 am | Report abuse |
  5. Canadian Banker

    I'm an economics major and also worked in a bank. I can tell you that it is the hardest thing I had to tell families and couples was that their mortgage loan was approved. In the end, the bank is trying to ensure the loan will be repaid in full, not go into foreclosure. The bank has strict guidelines that they wouldn't cross to ensure that. One of theose guidelines was you can't have more than 30% debt against your gross salary. That's all debt – credit card, student loan, personal loan, store card, etc.. Even your balance was zero on your 5-6 credit cards, the bank saw it as possible credit and made clients cancel credit cards, consilidate credit card balances and sometimes refinanced loans to a more favourable rate. All this was to reduce the chance of default. Then, a client could reapply for the loan. This is just responsable banking. That's what banks do in Canada anyway.

    April 8, 2010 at 6:23 am | Report abuse |
  6. Aaron252

    @Candace: Any economist? That is just an ignorant remark. Besides myself, how about any one of the many uber-prominent economists that yelled at the top of their lungs before the collapse (Schiff, Rogers, Faber, Soros, etc). Watch the "Schiff was Right" YouTube stuff, there is some good stuff there. The problem is that nobody listened when they THOUGHT they were rich in home equity/stocks.

    If you're old enough, you might remember the media covered fights between Reagan and Volcker. Politicians want lower rates. Those central bankers who resist get replaced.

    @Elna: This was Bush's fault too? While I don't like the guy either, you are either being naive or just want to blame all the world's ills on him and also the republican party. Both parties are to blame on this one (note: Reagan installed Greenspan, Bush and Clinton kept him). Moreover, it was the rich people's fault or they somehow gained? Let me give you eco 101 lesson: Increased liquidity via low interest rates and increased money supply (aka money printing/govt counterfeiting/etc) hurts the rich magnitudes more than the poor because it creates inflation which makes the rich (who have more money saved/inherited/whatever) worth less.

    Even if you're tempted to go with 'caveat emptor', you have to realize that low interest rates give the appearance of a rosy growing economy when indeed it is not. So businesses and people buy things they shouldn't. I'm not saying greed is not to blame as well, but it is the way of the world and cannot be contained. The government protects us from ourselves in many respects but not in this case – just the opposite. And of course some people should have said to themselves "Wow, I can buy this?" and reconsidered. But again, that's more human nature and the American Dream concept overextended. Greenspan/Bernanke are blatant liars and do whatever they can to keep the politicians happy. If they're not liars, then they are some of the worst economists on the planet.

    Good luck to us all

    April 8, 2010 at 10:19 am | Report abuse |
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