Alan Greenspan, former chairman of the Federal Reserve who was once viewed as nearly infallible on all matters economic, was publicly grilled on his role in the financial meltdown by the House Oversight and Government Reform Committee yesterday.
Greenspan defended his legacy at times and also acknowledged mistakes. “I have been going for 40 years or more with very considerable evidence that it was working exceptionally well,” he said.
Committee chairman Rep. Henry A. Waxman (D-Calif.) asked whether the former chairman was wrong to consistently oppose regulating the multi-trillion dollar derivative market. “Well, partially,” answered Greenspan.
Only once did he actually use the word “mistake” during the five-hour hearing.
“I made a mistake,” Greenspan said, “in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms.”
While the House dealt with the past, the Senate Banking Committee was hearing about the Treasury’s plans for the future. Neel Kashkari, Assistant Treasury Secretary for Financial Stability, tried to reassure members of the committee that despite its recent payout to partially nationalize private banks, the department was in tune with the troubles of homeowners burdened by mortgage debt as it continues to plan and execute the $700 billion federal rescue package.
Sheila C. Bair, Chairman of the Federal Deposit Insurance Corp. (FDIC), presented a plan in which the federal government would guarantee home mortgages to persuade lenders to ease the monthly financial burden on struggling homeowners. Under this plan, a lender would get a government guarantee that troubled loans would be repaid and in exchange, the lender would be required to significantly drop the interest rate, reduce the principal or extend the life of the loans.
Treasury officials are still discussing the mortgage guarantee plan, and Kashkari was unable to give the Senators a timeline or additional details.
“Again, senator, I’m not trying to be evasive,” said Kashari, “but it’s hard to predict the policy process.”
Indeed it is.
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