Greenspan: Don't Use Fed as a 'Magical Piggy Bank' (why stop now???)

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September 5, 2008

Greenspan: Don't Use Fed as a 'Magical Piggy Bank'
Ex-Fed Chair Alan Greenspan Says Government Needs New Power, Laws and Limits for Corporate Bailouts
By JEANNINE AVERSA
The Associated Press

WASHINGTON - Troubled by the Bear Stearns debacle, former Federal Reserve Chairman Alan Greenspan is advocating a new way of dealing with government bailouts of companies whose sudden collapse could wreak havoc on the country's economic and financial stability.

Greenspan says Congress needs to give the government new powers to handle troubled companies to minimize any potential losses to American taxpayers. A self-described libertarian Republican, Greenspan has a reputation for being wary of giving the government extra powers. However, in crisis situations, there needs to be a clear process for handling bailouts, rather than depending on the Fed to do so, he reckons.

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