The Godfather of the housing crisis, Alan Greenspan, believes the big banks that feasted on his policies are effectively out of control. So, what to do about the banks gone wild? How about hitting them where it hurts- right in the wallet?
"I don't think merely raising the fees or capital on large institutions or taxing them is enough," Greenspan said. "I think they'll absorb that, they'll work with that, and it's totally inefficient and they'll still be using the savings."
Probably right. There are enough outlets for banks to pass on those costs they'd hardly notice. Greenspan is a pretty cerebral guy though. He must be able to find a clever way to solve the too-big-to-fail issue while paying close attention to the recent delicate stabilization of the big banks amidst an environment of populist outrage and politicians foaming at the mouth for the opportunity to teach banks a lesson they'll never forget.
U.S. regulators should consider breaking up large financial institutions considered "too big to fail," former Federal Reserve Chairman Alan Greenspan said.
"If they're too big to fail, they're too big," Greenspan said today. "In 1911 we broke up Standard Oil -- so what happened? The individual parts became more valuable than the whole. Maybe that's what we need to do."
For the banking crucifixion squads, irrational exuberance may be back.
Greenspan Says U.S. Should Consider Breaking Up Large Banks [Bloomberg]