But at a hearing
held today by the House Committee on Oversight and Government Reform,
Greenspan acknowledged that the data fed into financial systems was
often a case of garbage-in, garbage-out.
Business decisions by
financial services firms were based on "the best insights of
mathematicians and finance experts, supported by major advances in
computer and communications technology," Greenspan told the committee.
"The whole intellectual edifice, however, collapsed in the summer of
last year because the data inputted into the risk management models
generally covered only the past two decades a period of euphoria."
He
added that if the risk models also had been built to include "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."
It was unclear from Cox's testimony just what sort of regulatory changes he was suggesting. But he said that the SEC is now engaged in "aggressive law enforcement
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