Greenspan Foresees No Credit Crisis, Recession

Federal Reserve Chairman Alan Greenspan today dismissed fears of a recession and said he sees no sign of a nationwide credit crunch choking off growth.

“All things considered, continued modest economic growth remains the most likely outcome, and . . . enough credit appears to be available to fuel this growth,” the central bank chief told the Senate Banking Committee.

While acknowledging that some borrowers are having trouble getting loans, Greenspan said that reflected a justifiable sense of caution by the banks.

Administration officials, lawmakers and some private economists have grown increasingly worried in recent weeks that banks are becoming so wary about extending loans that it could throw the economy into recession.

Banks have turned cautious as their loans have come under closer scrutiny from banking regulators following a spate of real estate bankruptcies in some regions and the collapse of many savings and loan institutions.

Administration officials have suggested that the Fed should consider easing its tight grip on credit and lowering interest rates to keep the economy going.

But Greenspan showed little sign that he was listening.

“There has not, so far at least, been a broad-based squeeze on credit,” he said.

He said the Fed is aware of the possibility that a credit crunch could undermine the eight-year economic expansion, but he added that has not happened so far.

Although credit has become tighter for commercial real estate, Greenspan said he saw no indications that the ordinary home buyer is having trouble getting loans.

Construction of office buildings is down from last year, but Greenspan blamed that on overbuilding in the past sparked by the ready availability of credit from thrifts and banks.

He said credit is tight in New England where property prices have sagged and the economy has slowed, but that elsewhere in the country loans are available.

“Access to credit has not been reduced to an extent that has had a significant damping influence on the American economy overall,” Greenspan said.