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Greenspan says US economy will flatten out -

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ELEANOR HALL: Now to the United States where the former chairman of the US Federal Reserve Alan
Greenspan has spooked investors.

Dr Greenspan is predicting that rather than experiencing a rapid recovery, the US economy will slow
next year as unemployment rises.

His gloomy assessment coincides with calls from one of Wall Street's biggest bankers for a single
global banking regulator to prevent another meltdown.

Business editor Peter Ryan has more.

PETER RYAN: Alan Greenspan has been a regular commentator during the depths of the global financial
crisis and now he's providing tips on the aftermath.

His predictions to date have been conservative, pessimistic and at times defensive of his record
during the boom.

And today he provided little encouragement for investors hoping for a rapid V-shaped recovery.

ALAN GREENSPAN: It's hard to envisage going up 50 per cent and then going up more. The odds are, I
have to assume, that we flatten out even though earnings are doing very well as you know. And that
flattening out is probably going to put some sort of dull face on 2010.

PETER RYAN: Dr Greenspan's outlook adds weight to warnings from the International Monetary Fund
that the global economy remains fragile at best.

OLIVIER BLANCHARD: The risk is that private demand doesn't pick up, the other factors are phased
out and then we have maybe another double dip with the very slow recovery, a faltering recovery.

PETER RYAN: The IMF's chief economist Olivier Blanchard also warned it was too early and too risky
to roll back the stimulus that has supported economies around the world.

OLIVIER BLANCHARD: At the same time there is this danger of the dynamics going wrong so at the same
time I think it's essential to think about programs which will make the medium term more
attractive.

PETER RYAN: In the case of the ailing US economy Alan Greenspan is tipping growth at an annual pace
of 3 to 4 per cent over the next six months, before it hits a wall. And he thinks that
unemployment, currently 9.7 per cent, will soon peak.

But he worries about the hidden impact that could hinder a faster recovery.

ALAN GREENSPAN: It's a significant other part of the unemployed which are those individuals who
have re-entered the labour force after going out and it's they who have been unable to find jobs,
which has added a full percentage point to the unemployment rate.

PETER RYAN: Dr Greenspan agrees that while the credit crisis is easing as inter-bank lending rates
fall, confidence in the banking sector is still weak. He says right now too much capital on bank
balance sheets can never be enough.

ALAN GREENSPAN: But we need more before financial institutions, intermediaries, are going to feel
comfortable with their funding capabilities and therefore their willingness to lend normally. We
are not quite there yet.

PETER RYAN: The stability of banks and greater capital adequacy dominated the recent G20 summit in
Pittsburgh.

Now one of Wall Street's top bankers, John Mack, who will soon retire as chief executive of Morgan
Stanley, appears to be seeking a place in history.

JOHN MACK: You know history does repeat itself and we do need to make changes in our regulatory
oversight. We do need a systemic manager that kind of ties everyone together.

So I worry that we don't make the progress that we should now that things are better.

PETER RYAN: John Mack wants to go beyond tighter regulation in the US alone. He wants a single
global banking regulator and a single set of rules.

JOHN MACK: There needs to be a set of standards that each firm has to follow. It's a global
economy. We compete globally. We need a set of rules and guidelines that everyone should follow.

PETER RYAN: Mr Mack's unexpected suggestion provoked instant cynicism.

WILLIAM COHEN: We can't even get a systemic regulator in this country.

PETER RYAN: William Cohen is one of the cynics. He's a former investment banker and author of House
of Cards which chronicled the events leading up to last September's collapse of Lehman Brothers.

John Mack's push for a global system will confront the Federal Reserve chairman Ben Bernanke who is
set to be grilled by the House Financial Services Committee on financial regulation in Washington
tomorrow.

ELEANOR HALL: Business editor Peter Ryan.