In a speech to the New York Economics Club on Tuesday, February 17, 2009, Mr. Alan Greenspan pointed out that there is a need for sufficient Capital to back lending and investments. This is one reason, the former Chair of the Federal Reserve System said, that financial institutions and the rest of the world are confronted now with a huge Credit Collapse: Not enough Capital to support lending. See Download Alan Greenspan, Speech to the New York Economics Club, Tuesday, February 17, 2009.
In the parlance of Insurance, a specialized sector of the financial system, Capital means Reserves. Lowering Reserves requirements means lowering the capability of Insurance Companies to pay Claims, in general terms. That too is a lesson to learn from the Credit Collapse.
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