Tags: Greenspan | Fed | financial | crisis

Greenspan: Fed Not Responsible for Financial Crisis

By    |   Thursday, 01 May 2014 02:24 PM

While some financial commentators blame the Federal Reserve for the 2007-09 financial crisis, that's not accurate, says Alan Greenspan, chairman of the Fed from 1987 to 2006.

The Fed bashers fault the central bank for lowering interest rates too much in the early 2000s and failing to regulate the financial industry strongly enough.

While the Fed cut rates to boost the economy, Greenspan tells CNBC he doesn't think that created a problem.

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"Despite the fact that we lowered rates, we did not have long-term rates moving down," he argues.

"We did not have money supply accelerating. There were no fingerprints of an easy money policy in the marketplace."

Greenspan acknowledges that he made mistakes in his tenure at the Fed. But, "I don't think that was one, and I don't think that we were as an organization significantly involved in what was happening in the global markets."

The subprime mortgage collapse was the biggest factor in the financial crisis, he notes. To be sure, Fed critics say the central bank was partly to blame for that by failing to police mortgage lenders more closely.

As for the current Fed, its policy statement Wednesday represents more of the same, economists say.

"The main takeaway from this report is simply that the Fed continues to feel confident about the economic recovery, notwithstanding the disappointing growth performance" in the first quarter, Millan Mulraine, deputy head of U.S. research at TD Securities, wrote in a note to clients obtained by The New York Times.

GDP expanded just 0.1 percent in the first quarter.

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While some financial commentators blame the Federal Reserve for the 2007-09 financial crisis, that's not accurate, says Alan Greenspan, chairman of the Fed from 1987 to 2006.
Greenspan, Fed, financial, crisis
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2014-24-01
Thursday, 01 May 2014 02:24 PM
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