Alan Greenspan says the Fed couldn't have prevented a bubble on Wall Street

The alternative is big rate increases. But raising rates enough to squeeze the speculation out of the financial markets would also probably kill off an economic expansion, he said, making the cure at least as bad as the disease.

The other weapon open to the Fed, which in addition to controlling official interest rates helps regulate the financial system, would be to tighten requirements for margin lending.

But Greenspan said there was little evidence that raising margin requirements would have tamed the market.