Greenspan: Don’t use Fed as a ‘magical piggy bank’

JEANNINE AVERSA
AP
Saturday, Sept 6, 2008

Troubled by the Bear Stearns debacle, former Federal Reserve Chairman Alan Greenspan is advocating a new way of dealing with government bailouts of companies whose sudden collapse could wreak havoc on the country’s economic and financial stability.

Greenspan says Congress needs to give the government new powers to handle troubled companies to minimize any potential losses to American taxpayers. A self-described libertarian Republican, Greenspan has a reputation for being wary of giving the government extra powers. However, in crisis situations, there needs to be a clear process for handling bailouts, rather than depending on the Fed to do so, he reckons.

A high-level panel of financial officials should be given broad authority to quickly determine whether a failing company poses a sufficient threat to the entire U.S. economy, he recommends. If so, the company would be shut down.

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“We need laws that specify and limit the conditions for bailouts – laws that authorize the Treasury to use taxpayer money to counter systemic financial breakdowns transparently and directly rather than circuitously through the central bank as was done during the blowup of Bear Stearns,” Greenspan wrote in a new epilogue to the paperback edition of his memoir, “The Age of Turbulence: Adventures in a New World.” (The paperback will be released Sept. 9; the hardcover came out last year.)

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2 Responses to “Greenspan: Don’t use Fed as a ‘magical piggy bank’”

1. Howard Says:
   September 6th, 2008 at 8:54 am

   He’s right. Instead, use the American taxpayer as a piggybank. It’s been going on for centuries, so why stop now?

2. johan[oneUNDERgod] Says:
   September 23rd, 2008 at 3:21 pm

   Its human nature to fear things just as it is human to err ,this isnt about miss-take ,but we are talking to the converted ,even greedspan ,
   the amero INCOME tax payer [not wage tax payer ,wages CANT legally be payable as if IN -come tax]
   but people wont learn the difference ] so just pay legally unconstituted tax
   [so govt spends more to pay out to its own ;
   ever more]
   declare a tax BREAK ,
   refuse to pay tax on WAGES untill govt stops feeding it ALL BACK to big buisness.
   GET real about inflation numbers [and the markets can judge the facts]

   be honest [where is the media? reporting FACT?]
   and get real [govt ISSUES currency [it DOES NOT lend ;its own legalised tender]
   BANKERS CANT @ISSUE @ COIN-age
   [govt do ] then bankers CIRCULATE it.

   Govt MAKES money
   bankers make bank notes [that get redeemable in cash ;ie coin]