(Washington : DC) Ucs News– Alan Greenspan, the former Chairman of the Federal Reserve, has declared the financial crisis a “once in a century credit tsunami” and gave warning that it would lead to mass unemployment.
Mr Greenspan blamed the global economic meltdown on investors’ insatiable appetite for bonds backed by increasingly suspect mortgages. He said: “It was the failure to properly price such risky assets that precipitated the crisis.”
But Mr Greenspan’s critics said that he left interest rates too low in the early part of this decade, spurring an unsustainable housing boom.
Speaking at a congressional hearing into the meltdown, Henry Waxman, a California Democrat, said that Mr Greenspan had “the authority to prevent irresponsible lending practices that led to the sub-prime mortgage crisis”.
Mr Waxman said: “You were advised to do so by many others. And now our whole economy is paying the price.”
Mr Greenspan admitted that he was “partially” wrong in his opposition to tighter regulation, and added that he was in a state of “shocked disbelief” that shareholders were not protected.
Separately, Henry Paulson, the US Treasury Secretary, has rejected criticism that he did not save Lehman Brothers from bankruptcy by protesting that he “didn’t have the powers” to prevent the broker’s collapse.
Mr Paulson told The New York Times that it would have been illegal for the US Government to bail out Lehman because the bank’s assets were so toxic that they could not have acted as collateral for any loan. “If someone thinks Hank Paulson could have made the Fed save Lehman Brothers, the answer is ‘no way’,” Mr Paulson said, pointing out that the recipients of government money had much safer assets.