The growth of the securitization market exacerbated the financial crisis, former Federal Reserve Board Chairman Alan Greenspan told Congress Thursday.
"The evidence now suggests — but only in retrospect — that this market evolved in a manner that, if there were no securitization, it would have been a much smaller problem," Mr. Greenspan told the House Oversight and Government Reform Committee. "It wasn't until securitization became a significant factor, which doesn't occur until 2005, that you have a huge increase in demand for subprime."
While he acknowledged the market turmoil was "broader than anything I could have imagined," he defended much of his record at the Fed. He deflected criticism that he ignored warnings the subprime mortgages might take a toll on the economy.
