WASHINGTON - FORMER Federal Reserve Chairman Alan Greenspan said he was late to see the storm gathering around United States mortgage lending practices and commended his successor Ben Bernanke's handling of the crisis, saying he would likely be responding in a similar fashion.
'I think he is doing an excellent job,' Mr Greenspan said of Mr Bernanke in a television interview scheduled to air on Sunday. Mr Greenspan was asked if he would lower interest rates as dramatically and quickly now as he did just ahead of, during and in the wake of the 2001 recession, according to excerpts of the CBS 60 Minutes interview released on Thursday.
'I'm not sure that's true,' he said. 'We were dealing with an environment back then when inflation was easing. We could have acted without the fear of stoking inflationary pressures.'
'You can't do that anymore. ... I'm not sure I would have done anything different (if chairman today),' he added.
The comments from Mr Greenspan, who was tested early in his tenure by the October 1987 stock market crash, come as Mr Bernanke's skills are challenged by rising defaults in the US subprime mortgage market, which caters to risky borrowers, and a related global credit squeeze.
Mr Bernanke's Fed has come under fire from some quarters for not acknowledging quickly enough how deeply the current crisis could harm the economy or responding aggressively enough to keep the US expansion on track. Some analysts have speculated that Mr Greenspan would have acted more swiftly.
Mr Bernanke and his colleagues meet on Tuesday. They are widely expected to lower benchmark overnight interest rates, which the Fed has held at 5.25 per cent since June 2006, by at least a quarter-percentage point.
Mr Bernanke had justified holding rates at that level despite some clamouring in markets for lower borrowing costs, on the grounds that inflation has remained troublingly high and needed to recede first.
Only in recent weeks, as credit stress mounted in financial markets and it became clear a housing recovery was a long ways off, have Fed officials suggested that worries about growth have supplanted long-standing concerns on inflation. -- REUTERS
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