Greenspan Says U.S. Economy Is Likely in a 'Pause'

Alan Greenspan
Alan Greenspan

Former Federal Reserve Chairman Alan Greenspan said that the recent slowdown in economic indicators is most likely temporary.

"It's more than likely a pause in the usual cyclical pattern," Greenspan said in an interview with CNBC.

Greenspan pointed to a slight uptick in industrial production and strong gains in the equity market as a possible signs of a re-acceleration of the economy.

Still, he emphasized the hazards of making concrete forecasts following the financial crisis, which he called the worst in history.

"You've got to be a little bit skeptical of any forecast that comes off that type of shock," Greenspan said. "Of course there's a possibility" of a double-dip recession.

Greenspan highlighted a lack of commercial lending as an obstacle to economic recovery, with banks holding nearly $1 trillion with Federal Reserve banks rather than making loans.

"They're scared," Greenspan said. "They're afraid they won't get their money back."

Greenspan criticized the financial reform bill for failing to address Fannie Mae and Freddie Mac, which he described as one of the "critical causes" of the financial crisis. The former Federal Reserve Chairman called for the institutions, which receive government guarantees on their debt, to be made either fully public or fully private.

"Our home mortgage market is essentially government guaranteed," Greenspan said.