Greenspan to Testify on Subprime Mess
Originally posted on Washington Wire.
The congressional panel investigating the financial crisis announced the witness list for next week?s much-anticipated three-day hearing focusing on who?s to hold responsible for the subprime lending fiasco.
Former Federal Reserve Chairman Alan Greenspan highlights the list of witnesses, as expected. He?ll be the first witness to face the Financial Crisis Inquiry Commission on Wednesday — and the only witness from the Fed. He?s likely to be grilled over the central bank?s choice not to tighten up on the loose lending standards that many banks and mortgage companies were employing in the years chief up to the collapse. Defaults on poorly-documented subprime mortgages undermined the value of many mortgage-related securities, and helped trigger the broader financial crisis in 2008.
Greenspan already has cited the Fed?s decisions on lending standards as his largest unhappiness from the meltdown. He has said he thought the markets would be sufficiently vigilant to minimize the risk themselves. But the on the rise practice of securitizing mortgages into increasingly complex instruments apparently diluted accountability among lenders and investors, and encouraged poor risk management.
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