Greenspan: Taxpayers on the Hook to Rescue JPMorgan in Crisis

“Former Federal Reserve Chairman Alan Greenspan said JPMorgan Chase & Co. is akin to Fannie Mae and Freddie Mac because taxpayers would shoulder the burden of its rescue in an emergency, rather than let it collapse.

JPMorgan, the nation’s largest bank, is an example of implicit government guarantees not measured in the nation’s official public-debt statistics, Greenspan, 88, said Wednesday at a forum in Washington organized by the Peter G. Peterson Foundation. The reality is that the government would prop up many financial firms and other companies if needed, he said.

“JPMorgan is a Fannie Mae-, Freddie Mac-type of institution, because they are indeed too big to fail, and taxpayer monies will come in behind them to hold them up if necessary,” said Greenspan. He sat on New York-based JPMorgan’s board before his appointment to Fed chairman in 1987.

Housing financiers Fannie Mae and Freddie Mac, which buy loans and package them into securities, were taken into government conservatorship during the financial crisis and received $187.5 billion in taxpayer funds to stay afloat before a market turnaround propelled them to record profits. The pair now back about two-thirds of new U.S. home-loan originations.

U.S. debt statistics should include a “very significant part of the financial institutions,” Greenspan said. Because the government also bailed out automakers and insurer American International Group Inc., the public debt includes “a lot of the nonbanking as well,” he said…..”

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