Congressman Barney Frank believes Alan Greenspan’s view that regulators do not have enough insight into the massive financial system to regulate it and don’t have the right tools to do so is an incorrect view, according to his piece in the FT.
Greenspan wrote an editorial in the FT last week explaining how he thinks the Dodd-Frank bill has already done more harm than good.
Frank believes it would have been a “grave mistake” to have left the crisis alone when unemployment was surging and the economies in the U.S. and Europe were both severely damaged.
Frank cites several examples:
- Greenspan argued that regulators can never get more than a glimpse of the financial system. Dodd-Frank gives regulators tools to foresee and prevent another crisis from happening.
- He points out that new regulations have made the very confusing derivatives market more transparent. Stress tests and more detailed registration rules for hedge funds are also helping prevent more problems.
- Greenspan argued that these new rules may reduce the size of the financial sector; Frank argues that more growth in finance may actually just hurt other industries.
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