http://www.reportonbusiness.com/servlet/story/RTGAM.20080912.wrdodge12/BNStory/Business/homeJACQUIE MCNISH
From Friday's Globe and Mail
September 12, 2008 at 2:44 AM EDT
Many of the world's central bankers saw signs of a credit crisis five years ago, said former Bank of Canada governor David Dodge, but no one foresaw the “period of great financial danger and unrest” that followed the meltdown in credit markets last summer.
“We've known for a long time, going back to 2003 and 2004, that we were building up to a global problem that needed to be resolved,” Mr. Dodge said during an interview to mark his new career as an Ottawa-based senior adviser to one of Canada's largest law firms, Bennett Jones LLP.
The biggest danger, he said was the overheated U.S. housing market and proliferation of mortgage-linked securities, which left global investors and major financial institutions exposed to billions of dollars of losses. Some powerful critics such as former U.S. Federal Reserve Board chairman Alan Greenspan privately warned for years “that a disaster was waiting to happen” in a real estate sector fed by historically easy access to mortgages, he said. But Wall Street and other regulators turned a deaf ear.
“It was very hard to get reform because there was the perception that if you make mortgages more accessible, you are helping homeowners, but what you're really doing is driving up home prices.”