Alan Greenspan, former chairman of the Federal Reserve (U.S. central bank) has stated that the central bank and other regulators had failed during the financial crisis because they were indifferent to risk, transmit Bloomberg. “Even with the collapse of private risk management, financial system would remain stable if the second level of protection – regulatory bodies function efficiently,” he said in a speech at the Brookings Institution. “Under the pressure of the crisis, however, they failed.” Greenspan, who headed the Fed from 1987 to 2006, said that low interest rates in his time have led to a housing bubble and the failure of regulators. “Although a number of years of our biggest banks had 10-15 permanent auditors appointed spot, they nevertheless managed to take” toxic “assets that have led them to bankruptcy,” he said. Greenspan acknowledged that he and his colleagues at the Fed did not realize the extent of the housing bubble and the consequences it can have on the economy. According to him, increased requirements for capital adequacy and liquidity to banks will help prevent future crises.
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