Current Fed Chairman Ben S. Bernanke ``is doing an excellent job,'' Greenspan said in an interview on the 60 Minutes program, according to excerpts e-mailed by CBS today. The show is scheduled to air on Sept. 16, a day before the publication of Greenspan's book, ``The Age of Turbulence.''
The remarks come amid criticism among some investors that Bernanke has failed to be as forceful as his predecessor in responding to financial turmoil. Greenspan in 1998 cut interest rates three times after a Russian debt default rippled through global markets. Bernanke's Fed has refrained from lowering its benchmark so far, relying on other tools to provide liquidity.
``I'm not certain I would have done anything different'' than Bernanke, Greenspan said in the interview, according to excerpts released by CBS. ``I'm not sure that's true,'' Greenspan said when asked if he would act ``dramatically and quickly now.''
The former Fed chief, who led the central bank for 18 years, said inflation is a bigger concern now than when policy makers cut the target rate for overnight loans between banks in 1998, CBS said.
``We were dealing in an environment back there where inflation was easing,'' Greenspan said, according to the excerpts. ``We could have acted without the fear of stoking inflationary pressures. You can't do that anymore.''
`Vote of Confidence'
``Greenspan, given his significant legacy and stature, giving Bernanke an `atta-boy' in this environment is a positive boost for Bernanke,'' said William O'Donnell, head of U.S. rate strategy for UBS Securities LLC in Stamford, Connecticut. ``It's a nice vote of confidence for Bernanke going into next week's meeting.''
The Federal Open Market Committee will lower the benchmark rate by a quarter percentage point, to 5 percent, when it meets Sept. 18, according to the median forecast of economists surveyed by Bloomberg News.
As chairman, Greenspan won admiration for steering the economy through a series of crises, pumping out money to help growth rebound from a stock-market crash in 1987.
Housing Bubble
After the 2001 recession, the Fed cut its benchmark rate to a four-decade low of 1 percent. That move, along with Greenspan's hands-off approach to regulation, have brought him under fire as this year's bursting of the housing bubble and the subprime mortgage crisis again threaten to sink the broader economy.
Greenspan said in the interview that he was aware of lax lending standards in the subprime market, in which borrowers have little or poor credit history. The admission comes a week after the death of former Fed Governor Ed Gramlich, who had pushed Greenspan to strengthen the central bank's oversight of banks during the record U.S. mortgage boom from 2004 to 2006.
``While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late,'' Greenspan said in the 60 Minutes interview. ``I really didn't get it until very late in 2005 and 2006,'' as he was about to leave office.
Senator Charles Schumer of New York, a Democrat who chairs the congressional Joint Economic Committee, said in a statement that ``Greenspan was one of smartest regulators this country ever had. If he missed it, then it should be a warning to the current regulators about the depth of this crisis.''
Gramlich's Push
Gramlich, who served from November 1997 until August 2005, urged Greenspan to examine the home-loan units of banks under the central bank's jurisdiction.
``It was nothing to look into particularly because we knew there was a number of such practices going on, but it's very difficult for banking regulators to deal with that,'' Greenspan said in the interview, CBS said.
Some economists and officials have blamed the housing bubble on the Greenspan Fed's rate reductions from 2001 to 2003. The former chairman rebutted that criticism, CBS said.
``It was our job to unfreeze the American banking system if we wanted the economy to function,'' Greenspan said. ``This required that we keep rates modestly low,'' he said.
Traders and economists expect the Fed will cut its benchmark rate by at least a quarter percentage point, the first reduction in four years, when policy makers meet on Sept. 18. Some investors and prominent analysts have said Bernanke should already have taken such action to reduce the threat of a recession.
``My judgment is there is enough of a risk that the Federal Reserve should be responding'' by cutting rates to reduce the chance of a recession, Harvard University economist Martin Feldstein, who heads the group that dates U.S. business cycles, said in an interview in Jackson Hole, Wyoming while attending a Fed conference last month.
