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Financial Development has made the World Riskier

Photo: Raghuram Rajan

In August of 2005, Raghuram Rajan presented a paper at a Federal Reserve conference warning Alan Greenspan and Larry Summers of the increased potential for a financial crisis.

It was August 2005, at an annual gathering of high-powered economists at Jackson Hole, Wyo. -- and that year they were honoring Alan Greenspan. Mr. Greenspan, a giant of 20th-century economic policy, was about to retire as Federal Reserve chairman after presiding over a historic period of economic growth.

Mr. Rajan, a professor at the University of Chicago's Booth Graduate School of Business, chose that moment to deliver a paper called "Has Financial Development Made the World Riskier?" ..

He says he had planned to write about how financial developments during Mr. Greenspan's 18-year tenure made the world safer. But the more he looked, the less he believed that. In the end, with Mr. Greenspan watching from the audience, he argued that disaster might loom.
Raghuram Rajan, Professor University of Chicago, former Chief Economist for the International Monetary Fund retired chairman of the Federal Reserve Bank of Kansas City