Greenspan Has No `Regrets' as Housing Slump Deepens

Nov. 23 -- Former Federal Reserve Chairman Alan Greenspan said he has ``no particular regrets'' and that the deepening slump in the U.S. 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,'' Greenspan said today in Oslo. ``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 U.S. cities last quarter as stricter lending standards caused a 14 percent drop in sales nationwide, the National Association of Realtors said on Nov. 21. 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,'' Greenspan said. ``It was the weakest link in the international financial sector.''

Prices dropped in 54 of 150 U.S. metropolitan areas in the third quarter and the median sales price slid 2 percent nationwide, the National Association of Realtors said. 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.

``The decline in subprime-financed housing starts is over,'' Greenspan said. ``It went to zero and can't get any lower.''

`Mess'

Joseph Stiglitz, a Nobel Prize-winning economist, said Nov. 16 that there is a 50 percent chance that the U.S. will slide into a recession after the ``mess'' left by Greenspan. The retired Fed chairman defended his record in a statement released the same day, saying the criticisms were ``inaccurate or incomplete.''

After the 2001 recession, the Fed cut its benchmark rate to a four-decade low of 1 percent. 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 economy.

``The fact that the Fed fund rate went down to 1 percent in 2002 was an important part of the latter stages of the housing boom,'' said Bruce Kasman, chief economist at JPMorgan Securities Inc. ``It wasn't the only thing, and it wasn't necessarily a bad thing. In the end, we're going to look back at what happens next to recognize what the trade-offs were.''

Growth Outlook

Greenspan said on Nov. 7 there is a ``less than 50-50'' chance of a U.S. recession, reiterating remarks made in late October. He didn't give a view on the chances today.

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 Oct. 31 interest-rate cut as a ``close call.''

Members of the Federal Open Market Committee predicted growth may slow next year to as low as 1.8 percent. The numbers are ``notably below'' the 2.5 percent to 2.75 percent anticipated in June, the Fed said.

Fed officials have said they expect jobs growth, record exports and business spending to help sustain the expansion through the recession in housing. Government figures on Nov. 20 showed no sign of a bottom for homebuilding, as residential construction permits slumped to their lowest level since 1993.

The dollar's slump to a record low against the euro may have to be addressed by U.S. Federal Reserve policy makers, according to Greenspan.

``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.''

Greenspan, 81, is on a world tour to promote his memoir, ``The Age of Turbulence: Adventures in a New World.'' The book topped Amazon.com Inc.'s list of best-sellers on Sept. 17, the day of its release. Greenspan led the central bank for 18 years until January 2006.