U.S. senators assail Fed on subprime woes

March 23, 2007 at 11:54 AM
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WASHINGTON, March 23 (UPI) -- U.S. senators accused the Federal Reserve and former Chairman Alan Greenspan of a "pattern of neglect" that led to the current subprime mortgage crisis.

Senate Banking Committee members said the Fed had the power to regulate risky lending practices, but chose not to use it, even as subprime mortgages given to buyers with checkered credit helped drive up housing prices across the country.

"Given what we know now, yes, we could have done more sooner," Fed Director of Banking Supervision and Regulation Roger Cole told the committee.

Sen. Jim Bunning, R-Ky., asked how questionable lending practices could have spread "under Greenspan's watch."

Greenspan, in an interview with The Washington Post, declined to comment on whether the Fed was a lax regulator.

At one point, committee Chairman Christopher Dodd, D-Conn., held up three large, blue charts showing the Fed was aware lending standards were deteriorating as far back as 2003.

"A pattern of neglect by federal bank regulators ... precipitated the subprime mortgage crisis that could cause 2.2 million homeowners to lose their homes," he said.

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