International

A mistake, admits Greenspan

New York/London: The former U.S. Federal Reserve Chairman, Alan Greenspan, has conceded that the global financial crisis has exposed a “mistake” in the free market ideology, which guided his 18-year stewardship of U.S. monetary policy.

A long-time cheerleader for deregulation, Mr. Greenspan admitted to a Congressional committee on Thursday that he had been “partially wrong” in his hands-off approach towards the banking industry and that the credit crunch had left him in a state of shocked disbelief. “I have found a flaw,” said Mr. Greenspan, referring to his economic philosophy.

It was the first time the man hailed for masterminding the world’s longest post-war boom has accepted any culpability for the crisis that has engulfed the global banking system.

During a feisty exchange on Capitol Hill, he told the House oversight committee that he regretted his opposition to regulatory curbs on certain types of financial derivatives which have left banks on Wall Street and in the Square Mile facing billions of dollars worth of liabilities.

“I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms,” said Mr. Greenspan.

As the crisis continued to depress global stock-markets, U.S. Treasury Secretary Henry Paulson also offered a partial confession, admitting he ought to have anticipated a meltdown in the mortgage industry widely blamed for triggering the crisis. — © Guardian Newspapers Limited, 2008

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