Even in times without financial crises or bubbles, banks in the U.S. need a "larger buffer" of capital to assure their liquidity, said former Federal Reserve Chairman Alan Greenspan. "It is critical, but it has got to be done and it is not going to be easy to do," he said. The big challenge presented by bubbles isn't identifying them, Mr. Greenspan said. The problem is figuring out how to deflate them without damaging the underlying economy, he said.
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