Greenspan: Bailouts Are Biggest Threat To U.S. Future

What are biggest threats to America's economic future?

According to former Federal Reserve Chairman Alan Greenspan, government bailouts of "too big to fail" financial institutions are the biggest dangers looming over the U.S. economy.

Speaking at the conservative-leaning American Enterprise Institute, Greenspan noted that, during his tenure at Fed Chairman he had long-standing concerns about the size of American financial institutions. Previously, Greenspan supported bailing out banks, but called for clearer standards for choosing bailout recipients.

Addressing Wall Street pay, Greenspan suggested that publicly traded investment banks return should return to being structured as privately held partnerships:

"..a large step in addressing that incentive failure--in fact, a step backwards in time--would be to require non-bank financial activities to be organized as partnerships, in effect reversing the New York Stock Exchange ruling of 1970 that permitted members to incorporate.

As partnerships, investment banks were an exceedingly cautious bunch. They rarely took speculative positions, as general partners were particularly sensitive to their personal unlimited liability. It is inconceivable that, as partnerships, investment banks would have taken the enormous risks that turned out so badly this decade."

Check out the full text of Greenspan's speech below:

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