Greenspan rejects claims he was responsible for crisis

ALAN Greenspan, the former head of the US Federal Reserve, yesterday mounted a defence of his discredited legacy before a US panel investigating the origins of the 2007-9 financial crisis.

Similar to evidence he has given in the past, Greenspan, 84, disputed critics who said he had kept US interest rates too low for too long, encouraging risky lending.

Greenspan, who chaired the US Federal Reserve for nearly two decades, also hit back against criticism that the Fed under his rule failed to regulate high-risk loans to borrowers who could not afford to repay them.

Testifying to the Financial Crisis Inquiry Commission (FCIC), Greenspan insisted that the Fed lacked the authority to regulate the non-bank lenders that issued most subprime mortgages.

But Phil Angelides, the panel chairman, said the Fed had issued guidance on predatory lending but had failed to regulate it. "You could've, you should've and you didn't regulate the lending activities," he said.

Greenspan blamed a litany of other parties and historical events for the meltdown, but accepted no responsibility for himself or the Fed. He said excess saving in developing nations had left too much money in the system. And he said credit rating agencies undercounted the risk of mortgage investments. He said the US government's policy of encouraging home ownership had pushed government-backed mortgage giants Fannie Mae and Freddie Mac to create demand for risky loans.

His appearance opened three days of hearings by the FCIC. It will also question former top executives of bailed-out banking group Citigroup and troubled housing finance giant Fannie Mae.