Alan Greenspan gives somber testimony

The House Committee on Oversight and Government Reform held a long meeting on Thursday in Washington to discuss the current financial crisis with figures like former Chairman of the Federal Reserve Alan Greenspan and former Secretary of the Treasury, John Snow.

At the meeting, Greenspan acknowledges that he may have misjudged the regulatory abilities of the free market.

In response to comments by Representative Henry Waxman, the chairman of the House Committee on Oversight, Greenspan referenced the error.

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” he says.

Video of his testimony is available through CNBC in conjunction with the New York Times here.

Greenspan testified before the Committee on Oversight so that the committee would better be able to identify how the regulations already in place did not prevent the current financial situation. During his service from 1987 until 2006, Greenspan was a strong proponent of deregulation. His position on derivatives, which are playing a role in the current crisis, has been criticized by some as too lenient.

By the end of his term, the use of derivatives by financial institutions had become widespread and complex which resulted in widespread exposure to risk.

Perhaps in an effort to emphasize the potential for future problems, Greenspan says he “cannot see how we will avoid a significant rise in layoffs and unemployment.”

Click here for the video.

--Bridget O'Sullivan

CONSUMER WOES: Digging deep into the debt hole

Why do Americans continue to dig themselves into a hole?

Back in the day, people set money aside for personal purchases and saved for surprise expenses. Today, the average American household carries $8,565 in credit card debt, a 15% increase from the year 2000.

In total Americans have $2.56 trillion in consumer debt, up 22% since the year 2000 according to the Federal Reserve Board. For some reason, debt is increasing as most American's incomes are not. We have grown into a consuming society that believes it is OK to be in debt, in order to have that new phone, new outfit, or new car.

Disposable income that must be used for debt (credit card payments, car loans, mortgage interest, principle) is up to 14.5% from 11% just 15 years ago.

The New York Times tells the story of Diane McLeod and her debt hole.

McLeod began debt free, but a divorce caused her to spend and rack up $25,000 in credit card debt. She bought a home soon after with a $135,000 mortgage. Five years later illness and irresponsibility caused McLeod to owe $237,000 on her mortgage.

Now in foreclosure, it is hard for her to see light at the end of the tunnel.