Tuesday Topic: Alan Greenspan on Everything Economic

In his new book, "Capitalism in America," former Federal Reserve Chairman Greenspan covers an impressive amount of ground, but the plot of most interest to bankers may be what he's saying about bank capital. According to an excerpt published by the Wall Street Journal, Greenspan believes the key to averting another financial crisis lies in higher capital levels. Much higher. Here's what he writes: "In the wake of the crisis, the federal government passed the monstrously complicated Dodd-Frank Act, which tried to reduce risk in the financial system through regulation. A better approach would have been to focus on the amount of capital that banks are required to hold in order to operate. In the run-up to the crisis, banks on average kept about 8-10% of their assets as equity capital. If regulators had forced them to keep 25%, or better still 30%, it would have radically reduced the probability of contagious defaults-the root of all financial crises." The nearly 500-page book is dedicated to solving our country's economic ills, which the 92-year-old Greenspan blames on "out-of-control entitlements and ill-considered regulations."

I'm looking forward to reading it on my vacation, which means there will be no Tuesday Topic next week. See you in November!