Former US Federal Reserve chairman Alan Greenspan refused responsibility for the US subprime mortgage crisis on Monday, saying he tried to warn the investment market of the risks posed by the mortgage products.
"Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s.
.....we must conclude that innovation and structural change in the financial services industry have been critical in providing expanded access to credit for the vast majority of consumers, including those of limited means.
This fact underscores the importance of our roles as policymakers, researchers, bankers, and consumer advocates in fostering constructive innovation that is both responsive to market demand and beneficial to consumers. "
Federal Reserve System’s Fourth Annual Community Affairs Research Conference, Washington, D.C. April 8, 2005