Allan Greenspan Takes the Hot Seat

October 23, 2008 12:00:00 AM PDT
The federal official running the $700 billion dollar financial rescue program reports "tremendous progress," as the bank credit freeze is apparently beginning to thaw. This, as the Fed's former chairman defended himself as lawmakers look into how the crisis snowballed.The same man once referred to as the "maestro" of the U.S. financial system took the hot seat today.

"Without the excess demand from securitizers, subprime mortgage originations undeniably the original source of the crisis, would have been far smaller and defaults accordingly far fewer," said Former Fed Chairman Alan Greenspan.

Greenspan defended actions he took during his 18 and a half years as chairman of the Federal Reserve that critics say contributed to the current financial crisis.

While he dismissed accusations that he left interest rates too low in the early part of the decade, he did take responsibility for some of the blame. "I made a mistake in presuming that the self interest of organizations, specifically banks and others, were such as they were best capable of protecting their own shareholders and the equity in the firms."

Some companies have already announced the most telling sign of a recession: job cuts.

"Well Wall Street is obviously going through its job cuts but and there'll be a lot more there. The retail industry is very hard strung right now and the automobile sector," said Dennis Berman a Columnist with the Wall Street Journal.

The labor department reported that new applications for unemployment benefits rose by 15,000 last week alone. Asian stocks fell for a second consecutive day, but the Dow went up slightly during early morning trading after falling more than 700 points in the last two days.

Greenspan said stabilization in the housing market is still several months away, but he described that as one of the most significant factor in thawing out credit.



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