Greenspan shocked at credit system breakdown | Reuters: "The former Fed chair said that a securitization system that stimulated appetite for loans made to borrowers with spotty credit histories, was at the heart of the breakdown of credit markets.
'Without the excess demand from securitizers, subprime mortgage originations -- undeniably the original source of crisis -- would have been far smaller and defaults, accordingly, far fewer,' he said.
A surge in demand for U.S. subprime securities, supported by unrealistically positive ratings by credit agencies, was the core of the problem, he added.
Greenspan proposed that that securitizers be required to retain 'a meaningful part' of securities they issued. He said that regulatory reform will be necessary in the areas of fraud, settlement, and securitization to re-establish financial stability."