The former Fed chair told angry lawmakers on Thursday that after 40 years of buying into free-market ideology he had “found a flaw.” Rep. Henry Waxman told Greenspan “our whole economy is paying the price” because he ignored advice and resisted regulation.
“Yes, I found a flaw,’’ Greenspan said in response to grilling from the House Committee on Oversight and Government Reform. “That is precisely the reason I was shocked because I’d been going for 40 years or more with very considerable evidence that it was working exceptionally well.’‘
Greenspan said he was “partially’’ wrong in opposing regulation of derivatives and acknowledged that financial institutions didn’t protect shareholders and investments as well as he expected.
“We cannot expect perfection in any area where forecasting is required,’’ he said. “We have to do our best but not expect infallibility or omniscience.’’