Former Federal Reserve Chairman Alan Greenspan Tuesday brushed back critics who contend that easy monetary policy fueled the housing bubble and ensuing bust, saying, "I respectfully disagree; they're wrong."

Mr. Greenspan was asked after a speech to a National Association of Realtors conference whether, in hindsight, he thought interest rates should have risen more when he was chairman earlier this decade.

He responded that housing activity is driven by long-term rates, and not the overnight rates set by the Fed. The housing boom, he added, actually began in 2000, one year before the Fed started cutting interest rates in 2001.

"I think there is a recalibration of financial history that I find very puzzling," Mr. Greenspan said.

In his speech, Mr. Greenspan said he is starting to see "seeds of bottoming" in the U.S. housing market, though that isn't reflected yet in home prices.

He called home prices the "Achilles' heel" of the U.S. economy, "which is otherwise running extraordinarily well in recent weeks."

The economy could withstand a further 5% drop in home prices, Mr. Greenspan said. But if they fall much beyond that, more conventional mortgages will be underwater, he warned.

Commenting on the global nature of the financial and economic crisis, Mr. Greenspan said one surprising feature is how uniform the downturn has been. "For the first time I can recall, the U.S. looked like everybody else," he said.

Mr. Greenspan added that his "fear" is that "we will draw in our horns" with protectionist trade policies.