[by Larry Goldfarb]

Alan Greenspan, former chairman of the Federal Reserve, told an Securities Industries and Financial Markets Association (SFMA) annual conference that ending "Too Big to Fail" and allowing banks to go through Chapter 11 bankruptcy will ensure that economy will get moving again.  

The primary purpose of finance was to "direct savings of the economy to investments in cutting edge technology," said Greenspan. The notion of "Too Big to Fail" has undermined that purpose, with the result that investments in long-term assets have been on the decline.  "Too Big to Fail" is considered shorthand for systemically important financial institutions, or SIFIs, as defined by U.S. bank regulators. Some of the largest SIFIs include the "Big Four" U.S. banks JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC)

As for regulation:

• Greenspan also strongly favored deregulation, but in the aftermath of the crisis, he has conceded that market forces failed to self-police. He attributed the failure to "human nature that can be improved upon"
• But while self regulation might not be the answer, neither is Dodd-Frank, according to the former Chairman. For one, it is difficult to write regulations that presuppose forecasts. "A necessary condition for a financial crisis is very few people expect it," he said.
• Moreover, the number of rules needed to be written under Dodd Frank is so daunting, that it is "physically impossible" for regulators, who have to be mindful of unintended consequences, to do the Act within the mandated time frame. 

For more information, please read [TheStreet.com, 10/23/12]