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C. Peter McColough Series on International Economics: The Global Financial Crisis: Causes and Consequences

Speaker: Alan Greenspan, President, Greenspan Associates LLC; Former Chairman, Federal Reserve Board
Presider: Peter G. Peterson, Founder and Chairman, Peter G. Peterson Foundation; Chairman Emeritus, Council on Foreign Relations
October 15, 2009

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Former Federal Reserve Chief Alan Greenspan spoke at the New York office of the Council on Foreign Relations on October 15, highlighting the major factors that led to the greatest financial crisis since the Great Depression and discussing what to expect in its aftermath. Greenspan addressed key economic issues including financing the United States' growing budget deficit, the recent decline of the U.S. dollar, how to regulate financial institutions that are "too big to fail," and the economic implications of the pending U.S. healthcare reform bill.

Here are some points featured in the conversation:

The declining U.S. dollar: Greenspan noted that he is not overly concerned about the decline in the U.S. dollar, since it has returned to levels that preceded the financial crisis. He said he was more concerned about the ability of the U.S. government to continue financing its growing budget deficit, as increasing interest payments will continue to expand the deficit and the debt.

Regulating "too big to fail" financial institutions: Greenspan said financial institutions deemed too big to fail should be broken up. The perception that the government will always bail these banks out affords them an implicit subsidy, he said, allowing them to borrow at lower cost and squeeze out competition, which eventually threatens the entire financial system.

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