Testifying before the House Committee on Oversight and Government Reform, Greenspan said he warned in 2005 of possible dire consequences of underestimating risk but not even he could have guessed at the scope and it has left him in a state of "shocked disbelief."
"We are in the midst of a once in a century credit tsunami," Greenspan said. "Central banks and governments are being required to take unprecedented measures. …
"The crisis, however, has turned out to be much broader than anything I could have imagined. It has morphed from one gripped by liquidity restraints to one in which fears of insolvency are now paramount."
Greenspan blamed the crisis on risk-management models that just used data from the past two decades, which he said was "a period of euphoria."
"Had instead, the model's been fitted more appropriately to historic periods of stress, capital requirements would have been much higher and the financial world would be in far better shape today, in my judgment," he said.
Greenspan, however, was optimistic.
"This crisis will pass, and America will reemerge with a far sounder financial system," he said.