TEXT OF INTERVIEW
Steve Chiotakis: Former Federal Reserve Chairman Alan Greenspan presents a paper today looking back at the banking crisis. A lot of people have blamed Greenspan for the financial meltdown because he pushed for reduced financial regulation. And in his presentation today to the Brookings Institution, Greenspan will outline what he thinks went wrong. Let’s talk about it this morning with Marketplace’s Brett Neely joining us from our Washington studio. Good morning Brett.
Brett Neely: Morning, Steve.
Chiotakis: So Greenspan has gotten a lot of flack for possibly allowing the housing market to overheat. Is this sort of a mea culpa for him?
Neely: Actually, I think in some ways it’s more a defense of his policies. He argues in his paper that his policy of keeping interest rates low for a very long time didn’t cause the housing bubble. Among other things, he blames the flow of cheap money from China and elsewhere for inflating the bubble. But Greenspan does say markets and regulators didn’t understand how risky some of the financial products were. And he thinks banks shouldn’t have been allowed to get as big as they did.
Chiotakis: And Brett, Greenspan may not be directly involved in policy anymore, but financial reform was one of the watchwords in Washington this week. Democratic Senator Christopher Dodd introduced a big proposal — any clues as to what Greenspan thinks about his bill?
Neely: Well, one of the big proposals in that bill is what’s called a systemic risk council. Basically, it’s a group of regulators who are supposed to spot bubbles and too-big-to-fail banks that could bring down the markets. Greenspan says he thinks bubbles are inevitable, and a new council probably won’t work.
Chiotakis: And before I let you go Brett, I mean let me ask you a basic question. If Greenspan has been partly blamed for the crisis, I mean, why are people even listening to him?
Neely: Well even though this crisis has dented his reputation, I mean remember, Alan Greenspan ran the Fed for 18 years. Investors in Washington are just used to listening to him, and I think the real question is whether his views have any effect on the debate over financial regulation.
Chiotakis: And we’ll see what he has to say today. All right Marketplace’s Brett Neely with us from Washington this morning. Brett, thanks.
Neely: Sure thing.
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