Alan Greenspan says don’t blame him for the latest market turmoil.
The former Federal Reserve chairman said critics who have argued recently that he helped bring on the crisis in the market for risky home loans by cutting interest rates for three straight years “are mistaken.
“It was our job to unfreeze the American banking system if we wanted the economy to function,” Greenspan told CBS’ “60 Minutes” during an interview to be broadcast on Sunday.
“This required that we keep rates modestly low.”
Greenspan said he didn’t recognize until very late in 2005 that the dubious lending practices – which gave homebuyers loans with low adjustable rates that could jump to precipitous levels – were serious enough to damage the economy.
“While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late,” he said.
As part of his 18-year reign as Fed chief, Greenspan ratcheted down interest rates from 2001 until 2004.
Though one Fed governor sounded an alarm about the rise of questionable lending tactics, Greenspan said he wasn’t in a position to deal with the problem.
“Well, it was nothing to look into particularly because we knew there was a number of such practices going on, but it’s very difficult for banking regulators to deal with that,” he said.
Greenspan said it isn’t clear that interest rate cuts would have slowed the recent stock market slide.