Greenspan Not Willing To Accept Blame for Foreclosure Crisis

Posted in Foreclosure Crisis, October 28th, 2008 |

The former chairperson of the Federal Reserve Alan Greenspan was not willing to accept the blame for the foreclosure crisis although he admitted to ‘flaw.’ Lawmakers have been putting pressure on him to make a statement. Greenspan said that the foreclosure crisis had exposed certain flaws in his years of thinking. This had resulted in him being reduced to a ‘state of shocked disbelief.”

Greenspan had relinquished his post in 2006. He referred to the banking and foreclosure crisis as ‘once-in-a-century credit tsunami.’ It resulted in the collapse of the free market structure. He also cautioned that things would worsen before they improved. Unemployment and non-stabilization of real estate will add to the problems for ‘many months’. Greenspan is known for this firm faith in free markets.

The depressing economic reports rolling in confirmed his views. The number of unemployed rose to 500,000 last week, as thousands will be retrenched following the announcements of Goldman Sach, Chrysler and Xerox. Dow Jones has been merrily swinging downwards.

Another banking regulator suggested that the government should opt for a plan that would guarantee loans so that borrowers would be able to overcome foreclosures. This should be included in the $700 billion bail out package. The plan is being considered with the chairperson of FDIC, Sheila Bair pushing it strongly.

The House Oversight Committee interrogated Greenspan. It was totally different from the time when as chairperson he had ruled over the economic boom for over 18 years. He came to be an icon of the free market in Wall Street and was held in awe by many in the Congress. But all that is history. He is being thought of to be the main culprit for the foreclosure crisis. The Democrats accused Greenspan and former secretary of the treasury John Snow together with Christopher Cox of Securities and Exchange Commission for causing the foreclosure problem by lifting regulations. This is the biggest catastrophe since the last 70 years.

The chairperson of the panel Henry Waxman said that list of regulatory errors and wrong decisions are too long. Today Greenspan is 82. He admitted having made a ‘mistake’ in believing that the banks would provide its shareholders the necessary protection while pursuing its own self-interests. He agreed it to be wrong of him to have shrugged off fears that the housing bubble would soon burst causing the present foreclosure crisis.