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Former Federal Reserve chairman Alan Greenspan has called the recent turmoil in the global financial markets a "once in a century credit tsunami".
Speaking before Congress, Mr Greenspan, who stood down as Fed chairman in 2006, said the crisis had left him "in a state of shocked disbelief".
He added that recovery in the US housing market was "many months" away.
However critics said Mr Greenspan could have boosted regulation of the markets to help prevent the crisis.
Regulation
Mr Greenspan made the comments to the House of Representatives Committee on Oversight and Government Reform.
Committee chairman Henry Waxman, a Democrat, suggested that Mr Greenspan had added to the problem by rejecting calls for the Fed to regulate the sub-prime sector and some complex, risky financial products.
"The list of regulatory mistakes and misjudgements is long," Mr Waxman said.
"Our regulators became enablers rather than enforcers. Their trust in the wisdom of the markets was infinite," he added, saying that the mantra became "government regulation is wrong".
One of the main criticisms against Mr Greenspan was that he left interest rates too low for too long, thereby fuelling the housing boom - which later turned out to be unsustainable.
However the former bank boss said he had made a "partially" wrong decision in thinking that relying on banks to use their self-interest would be enough to protect shareholders and their equity.
He acknowledged that his approach had had a "flaw" that had been shocking "because I'd been going for 40 years or more with very considerable evidence that it was working exceptionally well.''
