SALEM -- Former Federal Reserve Board vice chairwoman Alice Rivlin says major social changes are coming to America with the economic meltdown that has crushed financial and housing markets.

Rivlin said too many Americans were living beyond their means, including holding large mortgages with no down payments approved by unscrupulous lenders.

She also blamed a failure to modernize the nation's regulatory framework and overborrowing by the federal government.

"We need to modernize financial regulation and keep doing it and to recognize that there is no permanent fix," Rivlin said.

"Market participants are very smart," she added. "They will continue to innovate, find new wrinkles around whatever the regulatory rules are."

Rivlin, an economist and former New York Stock Exchange board member, told an audience of about 200 people at Willamette University she remains optimistic about a recovery.

"I think the situation is fixable," Rivlin said. "But it will mean a transition to a society that spends less and saves more."

She said some obvious things that need to be done include:

--Stricter regulation of mortgage markets;

--Uniform standards that call for minimum down payments and proof of ability to pay;

--Eliminating adjustable mortgage rates;

--Granting power to bankruptcy judges to renegotiate mortgage loans;

--Require rating agency fees to be paid by people who buy securities, not by those who sell them.

Her Thursday visit to the university came as Wall Street saw a reprieve, with volatile trading turning toward positive territory and oil prices continuing to move downward.

"The good news is that the collective actions of governments and central banks has probably avoided a total meltdown of the financial systems," Rivlin said.

But she said she disagreed with predictions by some that the economy could return to normal by the middle of next year.

"A healthy skepticism about what any economist says these days is probably in order," Rivlin said. "We are in uncharted territory."