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Greenspan: 'Didn't Get' Subprime Woes Until Late 2005

In a <I>CBS</I> interview, the former Fed chief defends his rate-cutting campaign and backs Bernanke.
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Alan Greenspan, the former chairman of the

Federal Reserve

, said he didn't grasp that subprime lending practices were significant enough to hurt the broader economy until late in 2005, but he defended his interest rate-cutting campaign that went from 2001 to 2004.

Greenspan made his comments to Lesley Stahl, whose interview with the longtime central bank chief will appear Sunday on

60 Minutes


Even though he knew some subprime lending methods were questionable, he didn't realize how severely they might spill over, according to a summary of his remarks released by



"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," he said in the interview. "I really didn't get it until very late in 2005 and 2006."

(To see Farnoosh Torabi and Simon Constable discuss Greenspan's comments,

click here.)

Though critics have contended that the string of rate reductions were the genesis of the subprime-lending mess, Greenspan said rates weren't kept too low for too long. "It was our job to unfreeze the American banking system if we wanted the economy to function. This required that we keep rates modestly low," he said.

Asked if would act as dramatically and quickly now as he did then if he were the current chairman, Greenspan said he wasn't sure that was accurate.

"We were dealing in an environment back there where inflation was easing," he said. "We could have acted without the fear of stoking inflationary pressures. You can't do that anymore."

Greenspan said that "I'm not certain I would have done anything different" if he were still the chairman.

As for his successor Ben Bernanke, Greenspan said he believes he's "doing an excellent job."