Investors, Not Fed, to Blame for Crisis--Greenspan

Reuters (04/07/08); Gaunt, Jeremy
Former Federal Reserve chairman Alan Greenspan refutes reports that monetary policy exacerbated a housing bubble that led to the current crisis in the financial markets. Although the central bank lowered interest rates to 1.0 percent in 2003 from 6.5 percent in 2000 under Greenspan's watch, he insists that sluggish economic conditions in mid-2003 indicate that monetary policy did not create the bubble. In a Financial Times piece, Greenspan says investors are responsible for the subprime mortgage crisis; and he notes that they snapped up mortgage-backed securities without paying attention to quality. He adds, "The problem is not the lack of regulation but unrealistic expectations about what regulators are able to prevent."