Alan Greenspan takes credit crunch blame

Alan Greenspan, the former chairman of the US Federal reserve, admitted yesterday to a Washington committee that his deregulation policies had led to the current crisis engulfing the global economy.

Under questioning by the House oversight committee, he said he had been "partially wrong" in his hands-off approach towards banking. "I have found a flaw," said Greenspan, referring to his economic philosophy. "I don't know how significant or permanent it is. But I have been very distressed by that fact."

Greenspan guided the US economy for 18 years until his retirement from the Fed in 2006. He took the view that banks were best left to regulate themselves - mistakenly, it now appears.

"I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms," said Greenspan.

The US Treasury spokemsman and former chairman of Goldman Sachs, Henry Paulson, also issued a mea culpa. He told the New York Times that "I could have seen the sub-prime crisis coming earlier." He rejoindered: "I'm not saying I would have done anything differently."