Charlie Rose Talks to Alan Greenspan

Let me begin with the question of Greece, the likelihood of default, and the potential ramifications.
The chances of Greece not defaulting are very small. It's extremely unlikely that the political system will work in such a manner as to create the type of finances which will solve this problem. What you have to do is get [Europe-wide] fiscal consolidation, meaning that all of the affairs that relate to budgets are governed by some central council. Once you do that, you're very close to political integration. And I think that the possibilities of that are virtually nil. Right now, Greece has got interest rates on its two-year notes of over 30 percent. That's almost the equivalent of the market saying the chances of this country making it approach zero. So I think that we have to be prepared to take the consequences. The reason that is so important to the U.S. is that the sovereign debt of these peripheral countries is held very heavily by the European banks, which will be up against the wall. The U.S. has very few liabilities against Greece. It's got huge liabilities against Europe.

Could Greece have the same impact as Lehman Brothers in 2008?
I doubt that, largely because the Lehman Brothers issue came up in a startling way. After Bear Stearns defaulted in March of 2008, there was a very considerable perception that if you are going to be bailed out, as Bear Stearns was, that all investment banks or all financial institutions which were larger than Bear Stearns would be bailed out. So when Lehman Brothers wasn't, the shock to the market was overwhelming. I don't think that this particular issue at this stage can be a shock.