Alan Greenspan Grilled On His Role In Meltdown

In front of the Financial Crisis Inquiry Commission Wednesday on Capitol Hill, former Fed chairman Alan Greenspan defended his tenure as the roots of the financial crisis were investigated.

Greenspan, as he has done in the past, disputed that he encouraged risky lending practices during his tenure by keeping interest rates too low for too long, and the accusations that he was unable to regulate the high-risk loans that become the catalyst for the economic recession.

"Why, in the face of all that, did you not act to contain abusive, deceptive lending?" panel chairman, Phil Angelides asked Greenspan.

Angelides shot down Greenspan's testimony that a series of actions the Fed took were designed to counteract the risky-lending practices by pointing out that they only covered 1 percent of the subprime lending market.

“I was wrong 30 percent of the time, and there were an awful lot of mistakes in 21 years," Greenspan said of his tenure as the Fed chairman.

He did not provide any details as to where he specifically failed, but did say that the banks and regulators were unable to anticipate that so many challenges would hit the financial system all at once.

Greenspan noted that the keys to keeping another recession caused by the financial system are to require banks to hold more capital, keep more cash-like assets and hold more collateral to protect themselves against the default of other financial institutions.

The appearance of Greenspan before the panel was the start of a three day series of meetings by the FCIC to investigate the role of high-risk mortgage lending by using Citigroup (NYSE: C) as the case study since the bank was heavily involved in the mortgage bubble.

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