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Former Fed chairman says crisis will pass, and U.S. will end up with 'far sounder financial system.'
By Aaron Smith, CNNMoney.com staff writer
Last Updated: October 23, 2008: 10:26 AM ET
NEW YORK (CNNMoney.com) -- Former Federal Reserve Chairman Alan Greenspan told a House committee Thursday that the nation will emerge from the current credit crisis with a "far sounder financial system."
"We are in the midst of a once-in-a century credit tsunami," Greenspan told the House Oversight and Reform Committee.
Greenspan said that whatever regulatory changes are made to respond to the crisis, "they will pale in comparison to the change already evident in today's markets."
He said that markets "will be far more restrained than would any currently contemplated new regulatory regime."
"Investors, chastened, will be exceptionally cautious," he added.
In opening statements, Rep. Henry Waxman, D-Calif., committee chairman, said the current economic crisis could have been prevented "if regulators had paid more attention and intervened with responsible legislation. The list of regulatory mistakes and misjudgments is long and the cost to taxpayers and the economy is staggering."
Greenspan offered some proposals for regulatory changes in his testimony, namely "to require that all securitizers [of loans] retain a meaningful part of the securities they issue."
Former Treasury Secretary John Snow and SEC Chairman Christopher Cox are also scheduled to testify.
Snow and Cox, in written testimony released before the hearing, both suggested that greater transparency be imposed on the markets.
Snow suggested a "more coordinated and less fragmented approach to financial regulation" with "greater international cooperation."
Cox said the SEC has adopted measures to strengthen investor protections against naked short-selling, which allows short selling without owning or borrowing the stock.
He said he has also launched an examination "of the effectiveness of broker-dealers' controls on preventing the spread of false information."
By Aaron Smith, CNNMoney.com staff writer
Last Updated: October 23, 2008: 10:26 AM ET
NEW YORK (CNNMoney.com) -- Former Federal Reserve Chairman Alan Greenspan told a House committee Thursday that the nation will emerge from the current credit crisis with a "far sounder financial system."
"We are in the midst of a once-in-a century credit tsunami," Greenspan told the House Oversight and Reform Committee.
Greenspan said that whatever regulatory changes are made to respond to the crisis, "they will pale in comparison to the change already evident in today's markets."
He said that markets "will be far more restrained than would any currently contemplated new regulatory regime."
"Investors, chastened, will be exceptionally cautious," he added.
In opening statements, Rep. Henry Waxman, D-Calif., committee chairman, said the current economic crisis could have been prevented "if regulators had paid more attention and intervened with responsible legislation. The list of regulatory mistakes and misjudgments is long and the cost to taxpayers and the economy is staggering."
Greenspan offered some proposals for regulatory changes in his testimony, namely "to require that all securitizers [of loans] retain a meaningful part of the securities they issue."
Former Treasury Secretary John Snow and SEC Chairman Christopher Cox are also scheduled to testify.
Snow and Cox, in written testimony released before the hearing, both suggested that greater transparency be imposed on the markets.
Snow suggested a "more coordinated and less fragmented approach to financial regulation" with "greater international cooperation."
Cox said the SEC has adopted measures to strengthen investor protections against naked short-selling, which allows short selling without owning or borrowing the stock.
He said he has also launched an examination "of the effectiveness of broker-dealers' controls on preventing the spread of false information."
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