Greenspan Predicts Dodd-Frank Won’t Avert Asset-Price Bubbles

Former Federal Reserve Chairman Alan Greenspan predicted the Dodd-Frank Act tightening regulation of U.S. financial institutions won’t prove effective in averting asset-price bubbles.

“I know the Dodd-Frank bill has got a huge number of ways at coming at the problem, none of which, in my judgment, will work,” Greenspan, 87, said today at the American Enterprise Institute in Washington.

“Bubbles are an inherent part of human nature,” fueled by investor euphoria, he said.

“The only way that I can see out of it is to find a way that the financial system does not default in a serial manner,” he said. “And the only way that you can guarantee that is, in fact, to reduce the amount of debt.”

Greenspan served as central bank chairman from 1987 until 2006 and was succeeded by Ben S. Bernanke, whose eight-year tenure ends Jan. 31. Vice Chairman Janet Yellen this month won approval from the U.S. Senate to be the next Fed chairman.

To contact the reporter on this story: Jeanna Smialek in Washington at jsmialek1@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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