MercoPress. South Atlantic News Agency

Greenspan says housing bubble is a global phenomenon

Greenspan has “no particular regrets” about the housing bubble

Former Federal Reserve Chairman Alan Greenspan speaking in Norway on Friday said he has “no particular regrets” and that the deepening slump in the US housing market isn't a result of his policies.

"Markets are becoming aware of the fact that the decline in house prices is not stopping", he said. "I have no particular regrets. The housing bubble is not a reflection of what we did, as it is a global phenomenon". Home prices fell in a third of US cities last quarter as stricter lending standards caused a 14% drop in sales nationwide, the US Association of Realtors revealed earlier this week. Declines in sales and prices signal the housing slump that began in 2006 may extend into its third year, matching the slowdown 18 years ago that ended in the 1991 recession. The collapse of the U.S. subprime market "was a shocker because no one expected it" insisted Greenspan. "It was the weakest link in the international financial sector". He underlined that "the decline in subprime financed housing starts is over; it went to zero and can't get any lower". According to the US Realtors association prices dropped in 54 of 150 US metropolitan areas in the third quarter and the median sales price slid 2% nationwide. Home sales, including single-family properties and condominiums, fell to 5.42 million at an annualized pace from 6.29 million a year ago, the report showed. Nobel Prize winning economist Joseph Stiglitz said in a Vanity Fair magazine article that that there is a 50% chance that the US will slide into a recession after the "mess" left by Greenspan. The retired Fed chairman defended his record in a statement released immediately saying the criticisms was "inaccurate or incomplete". After the 2001 recession, the Fed cut its benchmark rate to a four-decade low of 1%. That move, along with a hands-off approach to regulation, has brought Greenspan under fire as the bursting of the housing bubble and the subprime mortgage crisis threaten to sink the US economy. Greenspan earlier in the month said there is a "less than 50-50" chance of a US recession, reiterating remarks made in late October. Federal Reserve policy makers, now headed by Greenspan's successor Ben S. Bernanke, lowered their growth forecast in October and expressed concern about credit-market losses, even as they described the October 31 interest-rate cut as a "close call". The Fed predicts US growth may slow next year to as low as 1.8%. The numbers are "notably below" the 2.5 to 2.75% anticipated in June. Greenspan also said that the US dollar's slump to a record low against the Euro may have to be addressed by U.S. Federal Reserve policy makers. "Stable prices are necessary for maximum sustainable economic growth", Greenspan said. "To an extent that a weaker dollar is of such a magnitude that it creates serious problem, it needs to be addressed by policy makers", he concluded.