Greenspan grilled at Capitol
WASHINGTON — For nearly two decades, Congress treated Alan Greenspan with respect bordering on awe. No more.
Badgered by lawmakers, the former Federal Reserve chairman found himself denying the nation's economic crisis was his fault on Thursday but conceding the meltdown had revealed a flaw in a lifetime of economic thinking and had left him in a "state of shocked disbelief."
The interrogation of the 82-year-old Greenspan by the House Oversight Committee was a far cry from his 18Z\x years as Fed chairman, when he presided over the longest economic boom in the country's history. He was viewed as a free-market icon on Wall Street, and lawmakers hung on his pronouncements when he testified on Capitol Hill.
More typical on Thursday was an exchange with committee chairman Henry Waxman, who suggested Greenspan had contributed to "irresponsible lending practices" by rejecting appeals that the Fed intervene to regulate a surging subprime mortgage industry.
"The list of regulatory mistakes and misjudgments is long," Waxman said.
"My question for you is simple," he told Greenspan. "Were you wrong?"
"Well, partially," Greenspan said, though he went on to assign blame to overeager investors who did not stop to think about risks.
Greenspan, who stepped down in 2006, called the banking and housing chaos a "once-in-a-century credit tsunami" that led to a breakdown in how the free market system functions. And he warned that things would get worse before they get better, with rising unemployment and no stabilization in housing prices for "many months."
Gloomy economic reports backed him up. New jobless claims soared to just under 500,000 for last week, and Goldman Sachs, Chrysler and Xerox all said they were cutting thousands more workers. On Wall Street, the Dow Jones industrials bounced erratically all day before finishing up 172 points — after a two-day drop of nearly 750.
The crisis even prompted the Republican Greenspan, a staunch believer in free markets, to propose that government consider tougher regulations, including requiring financial firms that package mortgages into securities to keep a portion as a check on quality.
