Former Federal Reserve chairman Alan Greenspan denied his policies encouraged the type of risky lending that spurred the financial crisis, in testimony to a federal investigative panel Wednesday.
Greenspan -- whose reputation as a financial mastermind has been deeply undermined by the crisis -- said regulators could not be expected to predict and prevent crises.
"The recent crisis reinforces some important messages about what supervision and examination can and cannot do," he told a government inquiry into the origins of the crisis.
"History tells us they cannot identify the timing of a crisis, or anticipate exactly where it will be located or how large the losses and spillovers will be," he said.
Greenspan appeared before the committee that was established by President Barack Obama to examine the causes of the most serious economic crisis since the Great Depression.
In sometimes testy exchanges, Greenspan was accused by commission chair Phil Angelides of failing to prevent "abusive and deceptive" subprime home loans from causing the collapse of the housing market.
"You could've, you should've, and you didn't," said Angelides, a former treasurer of California and Democratic gubernatorial nominee for that state.
Greenspan denied that his Fed's policies of low interest rates and loose regulation encouraged lenders and borrowers to take ever greater risks.
"The house price bubble, the most prominent global bubble in generations, was engendered by lower interest rates, but... it was long-term mortgage rates that galvanized prices, not the overnight rates of central banks."
Once seen as infallible, Greenspan has come under withering attack since he left office in 2006 and his account of events was bluntly challenged by Angelides: "I want to make sure we are not rewriting or ignoring history here."
Greenspan admitted there were "an awful lot of mistakes" in his 21 years in office, but that he was right 70 percent of the time.
He said some actions taken in the build-up to the crisis could be included in the 30 percent of times that he was wrong.
After the meltdown, which is thought to have destroyed around seven trillion dollars' worth of housing market value, Obama vowed to rewrite the rules for banks and lenders whose excessive risks prompted the crisis.
Greenspan said that financial institutions must now be asked to keep more cash on hand to cover transactions and that instruments must be backed by high levels of collateral.
On Thursday the commission will hear testimony from Chuck Prince, a former chief executive of Citigroup, a large bank seen as playing a key role in the crisis.
© 2013 Thomson/Reuters. All rights reserved.