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From Alan Greenspan, on the size of U.S. banks:

If they’re too big to fail, they’re too big.

Interesting.  On the one hand, Greenspan is really on the side of the angels here.  “I don’t think merely raising the fees or capital on large institutions or taxing them is enough,” he says.  If they’re too big, we need to just chop ’em down to size.  On the other hand, he’s also using this as an opportunity to slag his successors for creating the moral hazard of too-big-to-fail in the first place: “When push came to shove, they didn’t stand up,” he says of the decision last year to rescue Fannie, Freddie, and AIG.  But it’s pretty hard to believe that if Greenspan had still been Fed chair at the time, he would have risked allowing the financial system to melt down.  And the “Greenspan put” predates the “Bernanke put” by many years.

Still and all, it’s interesting that Greenspan, of all people, is willing to endorse an idea that’s apparently too radical for current officeholders to even think about.  It’s sort of like all those out-of-office Republicans who say they’re in favor of healthcare reform now.  I guess it’s a lot easier to buck the tide when you’re not the one holding the bag.

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