Former Federal Reserve chairman Alan Greenspan | 60 Minutes Archive
In a Nutshell
Greenspan defended his Fed tenure and low interest-rate policy, admitting he underestimated the scale of subprime lending abuses and rejecting proposals to regulate them more aggressively. He claimed he could not have prevented the housing bubble or its fallout, insisted Bernanke was handling the crisis correctly, and pushed back against critics who blamed his decisions for the credit crunch. The interview also revealed his unusually close ties to the Clinton White House, his support for Bush-era tax cuts despite later regret, and his post-retirement forecast of further home-price declines and reemerging inflation.
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Alan Greenspan served as Federal Reserve chairman for 18 years and may be remembered as one of the best in American history. His tenure featured unprecedented economic growth, budget surpluses, and a booming stock market. He was praised for guiding the economy through the shock of 9/11. Greenspan wrote the memoir The Age of Turbulence, which was released as he faced criticism for the housing and lending crisis. Critics argued he established a pattern of bailing out Wall Street investors.
In his first major interview, Greenspan defended himself against criticism that he should have stopped shady practices in subprime lending. He admitted he missed its significance. When asked why he did not speak out despite having a powerful platform, Greenspan stated he was aware practices were occurring but had no notion of how significant they had become until very late in 2005 and 2006.
Former Fed governor Ed Gramlich proposed that the Fed examine subprime lending practices, but Greenspan rejected the idea. He believed the Fed would not be capable of doing what was suggested and that it was very difficult for banking regulators to deal with such practices. He maintained there was nothing particularly to look into because regulators already knew some practices were occurring.
Greenspan insisted there was nothing he could have done to prevent plummeting home prices, with a million families losing homes. Some economists argued he created the housing bubble and credit crunch by keeping interest rates too low for too long. He noted that rates were raised at every meeting from June 2004 until he left office, following 13 rate cuts during the earlier period.
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