BUSINESS
10/23/2012 04:46 pm ET

Alan Greenspan: 'We've Got To Get Rid Of Too Big To Fail'

Former Federal Reserve Chairman Alan Greenspan says that the government needs to stop implicitly guaranteeing big banks.

"We've got to get rid of too big to fail," Greenspan said Tuesday during a speech at a meeting of the Securities Industry and Financial Markets Association (SIFMA), according to a tweet from Reuters reporter Lauren LaCapra.

At the meeting, Greenspan said that abolishing too big to fail would help revive the economy, according to a tweet from Mary Thompson, a reporter for CNBC. Greenspan said that's because too-big-to-fail banks are misusing investors' savings, creating one of the biggest obstacles to more robust economic growth, according to LaCapra.

The comments echo those of Republican presidential candidate Mitt Romney, who called who called Dodd-Frank's designation of five banks as too big to fail the "biggest kiss" to New York banks during the first presidential debate. Conservatives and liberals alike have criticized too big to fail, saying it takes away the incentive for banks to avoid huge risks.

Greenspan has criticized too big to fail in the past, saying in 2009 that the government should consider breaking up big banks. "If they're too big to fail, they're too big," Greenspan said in 2009, according to Bloomberg.

While Greenspan served as Fed chairman between 1987 and 2006, he watched as the government deregulated the financial industry and banks got bigger and bigger. An acolyte of the libertarian author Ayn Rand, Greenspan had preached the importance of letting markets operate on their own with little government intervention.

But after the financial crisis, Greenspan has walked back on that ideology and acknowledged that some government regulation is necessary. Greenspan currently is working on a book that explores irrationality in human nature.

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