a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.
“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,”
acknowledged that his belief in deregulation had been shaken.
the use of exotic financial instruments called derivatives, had gotten out of control
he agreed that the multitrillion-dollar market for credit default swaps,
needed to be restrained.
“This modern risk-management paradigm held sway for decades,” he said. “The whole intellectual edifice, however, collapsed in the summer of last year.”