Greenspan says his "put" option is an illusion

LONDON (Reuters) - There is no such thing as the "Greenspan put", former Federal Reserve chairman Alan Greenspan said on Monday, pleading innocence to the charge he inflated asset bubbles by cutting rates too fast and too far.

"The alleged Greenspan put is an illusion," he said in a question and answer session in London as part of a tour to promote his new book.

Greenspan trimmed interest rates very quickly in response to financial market troubles in 1998 and then again in 2001.

His critics say the aggressive monetary easing -- the Fed funds rate sank as low as 1 percent at one stage -- encouraged investors to take on more risk in the belief that if and when they got in trouble the Fed would bail them out. That was the essence of the Greenspan put.

The former Fed chief said his actions had been necessary because economic upswings tend to be slower and downturns more abrupt, so it was natural to cut interest rates quickly when a slowdown was in sight.

"It takes a good deal longer for the cycle to expand than for it to contract," he said. "Therefore we are innocent."