Former Federal Reserve Chairman Alan Greenspan said a “once-in-a-century credit tsunami” has engulfed financial markets and conceded that his free-market ideology shunning regulation was flawed.
"Yes, I found a flaw,” Greenspan said in response to grilling from the House Committee on Oversight and Government Reform. "That is precisely the reason I was shocked because I’d been going for 40 years or more with very considerable evidence that it was working exceptionally well.”
Greenspan said he was “partially” wrong in opposing regulation of derivatives and acknowledged that financial institutions didn’t protect shareholders and investments as well as he expected.
"We cannot expect perfection in any area where forecasting is required,” he said. "We have to do our best but not expect infallibility or omniscience.”
Part of the problem was that the Fed’s ability to forecast the economy’s trajectory is an inexact science, he said.
"If we are right 60 percent of the time in forecasting, we are doing exceptionally well; that means we are wrong 40 percent of the time,” Greenspan said. "Forecasting never gets to the point where it is 100 percent accurate.”
Discuss amongst your selves — Greenspan: Bad FOMC Chair, or the Worst FOMC chair?
Greenspan Concedes to `Flaw’ in His Market Ideology
Scott Lanman and Steve Matthews
Bloomberg, Oct. 23 2008