Sweeping regulation introduced by the United States to prevent future financial crises could create major "market distortions," former Federal Reserve Chairman Alan Greenspan wrote in Wednesday's Financial Times.

The former bank chief slammed the Dodd-Frank Act, which imposes wide-ranging and strict new checks on financial institutions, for failing to "capture the degree of global interconnectedness."

Greenspan says the reforms, passed by Congress last year, would be impossible to implement, distortive to markets and a possible threat to U.S. living standards, the FT reported.

"The act may create the largest regulatory-induced market distortion since America's ill-fated imposition of wage and price controls in 1971," warned Greenspan, who was Fed boss from 1987 to 2006.

The Dodd-Frank legislation was the Obama administration’s response to the financial crisis, signaling a “re-regulation” of financial markets after the deregulation championed by Greenspan in the 1990s.

Greenspan says that Dodd-Frank’s “most surprising failure to rein in supposed market-determined excess” is to avoid a draconian clampdown on bankers’ pay, which he says would be of “doubtful” use.

The economist has been widely accused of having encouraged the recent U.S. housing bubble that led to the recent financial crisis due to his low interest rate policy.

But Greenspan, in his article, pointed out several areas where he believed the regulation was hindering economic recovery.

Greenspan argued that firms such as Ford Motor Credit were struggling to pull out of the slump as they could not meet credit rating requirements needed to raise funds.

He also said that new rules on proprietary trading unfairly punished U.S. banks.

He warned that a "significant proportion" of the foreign exchange derivatives market could leave the U.S. and that rules to limit bloated Wall Street bonuses would fail.

Top bankers would simply leave to work for their major "clients," he wrote.

"The problem is that regulators, and for that matter everyone else, can never get more than a glimpse at the internal workings of the simplest of modern financial systems," Greenspan wrote in the business broadsheet.

"Is the answer to complex modern-day finance that we return to the simpler banking practices of a half century ago? That may not be possible if we wish to maintain today’s levels of productivity and standards of living," he wrote.

"In moving forward with regulatory repair, we may have to address the as yet unproved tie between the degree of financial complexity and higher standards of living," he added.