Greenspan Sticks to Script

"For the moment, the broadly unanticipated behavior of world bond markets remains a conundrum," Greenspan told members of Congress. "Bond price movements may be a short-term aberration, but it will be some time before we are able to better judge the forces underlying recent experience."

During Q&A with senators, Greenspan further sought to dismiss one of the theories that caused bonds to trade off earlier this year.

Central banks, especially in Asia, were big buyers of Treasuries last year as they sought to recycle dollars they earned by selling to U.S. consumers and keeping their currencies in check. Signs that those purchases were slowing or might even reverse spooked some investors but Greenspan would have none of it.

"The notion, however, that came out a couple of weeks ago that there was a significant move toward selling off U.S. dollar instruments by foreign central banks actually was not accurate. The extent of holdings remains very heavy for dollars," Greenspan said, according to Bloomberg News.

The most recently released minutes of the FOMC, from its December meeting, said that some unnamed members of the committee were growing concerned that the period of low rates had sparked "potentially excessive risk-taking in financial markets," such as real estate, initial public offerings and corporate bonds.

Greenspan didn't reveal himself to be a supporter or dissenter of the coalition of the worried. Perhaps mindful of how his 1996 "irrational exuberance" statement had a brief but only temporary effect on stocks, he took a more moderate position in his testimony.

"History cautions that people experiencing long periods of relative stability are prone to excess," Greenspan said. "We must thus remain vigilant against complacency."

The maestro's statements on one of the hot-button political topics of the day -- Social Security reform -- also were muted. He didn't call the current situation a crisis and discussed the retirement insurance program only in the context of the government's entire range of coming fiscal problems.