The Fed's purchases of US government securities had "kept inflation from falling even further", he said.

BBC: US Fed's Ben Bernanke hails benefits of stimulus

But while many major international banks have seen large writedowns in the wake of rising defaults among the sub-prime mortgage market, the majority of China's US mortgage-backed securities were underwritten by US government agencies such as Fannie Mae.

BBC: RELATED BBC SITES

During 2000, Mr Greenspan invested in safe US government bonds, or Treasury securities as they are called.

BBC: Greenspan plays it safe