WASHINGTON, Oct 23 (Reuters) - Former Federal Reserve Chairman Alan Greenspan acknowledged he was “partially” wrong in his belief that some trading instruments, specifically credit default swaps, did not need regulation.
Henry Waxman, the Democrat who chairs the U.S. House of Representatives Committee on Oversight and Government Reform, cited a series of public statements by Greenspan saying the market could handle regulation of derivatives without government intervention.
“My question is simple: Were you wrong?” Waxman said.
Greenspan said he was “partially” wrong in the case of credit default swaps, complex trading instruments meant to act as insurance for bond buyers against default.
“I made a mistake in presuming that the self-interest of organizations, specifically banks and others, was such that they were best capable of protecting their own shareholders and the equity,” Greenspan said.
When asked by Waxman if his ideology pushed him to make bad decisions, Greenspan said he found a “flaw” in his governing ideology that has led him to reexamine his thinking. (Reporting by Kim Dixon; Editing by Lisa Von Ahn)