Greenspan says unfairly blamed, has no regrets

Analysis

Former Federal Reserve Chairman Alan Greenspan has lashed out again at his critics, saying he was being blamed unfairly for the credit crisis and that he had no regrets about decisions he took while at the helm.

In an interview in Tuesday's Wall Street Journal, Greenspan, who left the Fed in early 2006, says critics are ignoring evidence in his favor and failing to give credit to the thinking behind the Fed's decision to lower rates when he was in charge.

Critics say Greenspan, under whom US rates went from 6.5% in late 2000 to 1% in mid-2003, eased policy too much and then took too long to tighten again. That, they say, spurred excessive mortgage borrowing and stoked the housing bubble that is now the root cause of the credit crisis.

But Greenspan said the Fed cut rates to spur growth and prevent deflation and, at that time, dissenting votes on the policy committee were from those who wanted rates even lower.

Analysts also blame Greenspan for failing to press for stricter rules for bank lending to consumers with weaker credit records, and for not anticipating the subprime mortgage meltdown.

“I was praised for things I didn't do,” Greenspan told the newspaper. “I am now being blamed for things that I didn't do.”

In the interview, Greenspan admits he was wrong about the improbability of a housing bubble.

But WSJ reporter Greg Ip says Greenspan does not share some foreign central bankers' belief that their job is to defend against excessive asset-price inflation. No sensible policy, he maintains, could have prevented the housing bubble.

“I am reasonably certain that I am right here,” Greenspan is quoted as saying. If proved wrong, he says, “I will change. I do not have a vested interest in holding wrong ideas.”

Greenspan said rock-bottom interest rates actually went against his “19th century” aversion to easy money. “My inner soul didn't feel comfortable,” he is quoted as saying.

But he also denies intimidating others into falling in line.

“What I find amusing is that history is being rewritten with me being portrayed as a force that overwhelms and persuades all these highly educated, very intelligent people to do my bidding,” he says in the interview.

“That's just silliness. It's a terrible rewrite of history.” (Reuters)

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