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Greenspan Says Federal Company Would Best Ease Crisis

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Vivien Lou Chen
Bloomberg
Saturday, Aug 9, 2008

Former Federal Reserve Chairman Alan Greenspan said the government should create a company like the Resolution Trust Corp. to sell off the assets of any failing financial institution, while limiting taxpayer losses.

“The cost to taxpayers would still be a concern: any monetary intervention by government in a market almost always socializes losses and privatizes gains,” Greenspan wrote in an epilogue to the paperback edition of his memoir, “The Age of Turbulence.” “But, as happened with the RTC, the public cost could be minimized.”

U.S. lawmakers and Bush administration officials have recently debated how best to handle troubled financial firms amid losses totaling $494 billion stemming from the collapse of the mortgage market. Fed Chairman Ben S. Bernanke said last month nationalizing Fannie Mae and Freddie Mac, the largest U.S. mortgage-finance companies, is an option lawmakers can consider to reduce taxpayer risk.

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The Resolution Trust Corp., founded by the government in 1989 after the savings and loan crisis, disposed of the assets of failed financial institutions.

“Our country has long since abandoned the notion that we should leave crises to be resolved solely by the marketplace,” Greenspan said in an excerpt provided today by his office. The book is scheduled to be released next month.

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This article was posted: Saturday, August 9, 2008 at 4:15 am





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