Greenspan Calls Financial Crisis A ‘Credit Tsunami’
[Greenspan] said he and others who believed lending institutions would do a good job of protecting their shareholders are in a “state of shocked disbelief.” Greenspan also blamed the problems on heavy demand for securities backed by subprime mortgages by investors who did not worry that the boom in home prices might come to a crashing halt.
“Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment,” Greenspan said. “Fearful American households are attempting to adjust, as best they can, to a rapid contraction in credit availability, threats to retirement funds and increased job insecurity.”
He said a necessary condition for the crisis to end will be a stabilization in home prices, but he said that is not likely to occur for “many months in the future.”