No finance expert can get by without being asked about their thoughts on JP Morgan’s $2 billion (and counting) trading debacle.CNBC’s Maneet Ahuja caught up with Alan Greenspan, former Chairman of the Federal Reserve and Ben Bernanke’s predecessor.
“So what?” said Greenspan commenting on the matter.
He noted that the loss was just basically peanuts compared to the bank’s nearly $200 billion in equity.
More from Ahuja:
“My point is that you have to recognise that banks will lose money on occasion,” Greenspan said, “because that’s the way the system eliminates unproductive capital. Implicit in creating growth and productivity comes some degree of failure. If you have banks that are ‘too big to fail’, it implies you are using the government as a buttress to prop up otherwise unproductive failing institutions.”
Greenspan makes a good point. JP Morgan hasn’t exactly come screaming for a bailout.
However, the question remains: what if something like this happened at a less stable bank?
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