Greenspan Upbeat On Credit Crisis: Sources

Source : The Business Times, May 9, 2008

NEW YORK - Former Federal Reserve Chairman Alan Greenspan said on Thursday that the worst of the credit crisis is over, according to sources who attended a speech he delivered in New York.

Former Federal Reserve Chairman Alan Greenspan also said US house prices still had a long way to fall

Mr Greenspan said while the current credit crisis was the worst he had ever seen, the worst was over as low interest rates meant companies could borrow more cheaply long-term, the sources who attended his speech at the Alternative Public Strategies Conference told Reuters.

Conference organisers said Mr Greenspan had requested that members of the media intending to cover his speech could only do so in their personal capacity and would not be allowed to report on whatever he said.

He also said US house prices still had a long way to fall and that it was unlikely they would stabilise by year-end, the sources said.

As chairman of the Federal Reserve, Greenspan oversaw the reduction of the federal funds rate 1.0 per cent in 2003 which some critics charge provided fuel for the US real estate bubble that followed.

Mr Greenspan has vehemently rejected assertions that his monetary policy was the cause of the problem. Low interest rates and lending practises that saw loans being advanced to home owners with poor credit histories have been blamed for the US housing market meltdown.

The US economy is reeling from a housing-led slowdown, with some analysts convinced it is already in a recession despite a 0.6 per cent growth rate in the first quarter of 2008.

The Fed has cut it's key overnight lending rate by 3.25 percentage points to 2.0 per cent since mid-September in a bid to prevent the housing downturn from spilling over to the broader economy. The aggressive rate cuts were also directed at healing the fractured credit markets.

According the sources, Mr Greenspan mentioned that United States growth was likely to be sluggish for an extended period of time but that a so-called doomsday scenario was unlikely to materialise. -- REUTERS