Alan Greenspan, a former Federal Reserve chairman, told CNBC on Thursday morning that “the too big to fail problem” is “getting worse, not better.”
Greenspan, who was chairman of the Fed during the credit bubble that ultimately crashed the global economy and is widely blamed for that crisis, said that The Dodd-Frank Act “is not working.”
Dodd-Frank was passed to prevent a similar financial crisis.
“[What] we ought to do is to allow banks to fail, go through the standard Chapter 11 type of process of liquidation, and allow the markets to adjust accordingly,” said the 87-year-old Greenspan. “That has worked for a very long time.”
The statements contrast those made by Greenspan in 2009, when he called on regulators to consider breaking up the banks that were considered too big to fail rather than allowing them to fail.
“If they’re too big to fail, they’re too big,” Bloomberg News reports Greenspan said in October of 2009. “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.”
Earlier this week, an online petition garnered more than 97,000 signatures asking the Obama administration to take “immediate steps to break up the big banks and prosecute the criminals who used them to destroy our economy.”