Former chairman of the Federal Reserve Alan Greenspan told Congress on Thursday that he was shocked that self-regulation in the financial markets had not functioned the way he anticipated.
At one time, Greenspan – who left the Fed in 2006 after running it for nearly 20 years – was praised for enacting policies that helped stoke the property boom seen earlier this decade.
However, more recently some people have been laying part of the blame for the credit crisis on the chairman’s opposition to regulating the financial markets.
"I made a mistake 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," Greenspan told the House Committee of Government Oversight and Reform.
However, he explained that his decisions not to regulate risky practices such as credit default swaps was based on a philosophy that had previously worked "exceptionally well."
Other financial leaders testifying before Congress included Christopher Cox, chairman of the Securities and Exchange Commission.