Greenspan: Break Up Big Banks

Alan Greenspan thinks the Fed is making a mistake. The former Federal Reserve chairman said Thursday that former Treasury Secretary Hank Paulson’s decision to bolster “too big to fail” institutions like Fannie Mae and Freddie Mac, and to bail out banks was a bad one. “If they’re too big to fail, they’re too big,” Greenspan said. “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.” Greenspan’s dissent sharply contrasts with the current Fed leadership and the Obama administration’s strategies for rescuing Wall Street. Though Greenspan says “arbitrarily breaking down organizations into various different sizes” violates his philosophical leanings, “If you don’t neutralize that, you’re going to get a moribund group of obsolescent institutions which will be a big drain on the savings of the society.”