Former Fed Chairman Alan Greenspan is wrong when he says the Dodd-Frank financial reform bill will create major market distortions, says the bill's author.

Greenspan wrote in the Financial Times recently that the bill, which imposes wide-ranging and strict new checks on financial institutions, would be distortive to markets and threaten U.S. living standards.

Massachusetts Representative Barney Frank says the bill strengthens the system, adding that Greenspan's policies for deregulation and "light-touch oversight" left it vulnerable to a Lehman Brothers style collapse.

Alan Greenspan (Getty Photo)

"Mr. Greenspan is wrong on both counts. His rosy view overlooks a monumental crisis that threatened the foundations of the American economy, led to soaring unemployment, a continuing foreclosure crisis and weakened economies in the U.S. and Europe," Frank retorts in the Financial Times.

"It would have been a grave mistake not to address problems of inadequate regulation and lax oversight. Indeed, both his predecessor and successor as chairman of the Federal Reserve called for substantial changes and helped to shape the new rules."

Republican lawmakers are introducing legislation to repeal Dodd-Frank, saying it hampers U.S. economic growth and competitiveness.

"This financial takeover will strangle our economy and move jobs overseas unless it is repealed," says Senator Jim DeMint, the South Carolina lawmaker who introduced the measure, according to the Associated Press.

DeMint’s proposal is gaining support among Republican leadership in the Senate, including Mitch McConnell of Kentucky, the minority leader, and Richard Shelby of Alabama and ranking member on the Banking Committee.

Shelby "was the leading opponent of Dodd-Frank and absolutely supports legislation to repeal it," says his spokesman Jonathan Graffeo, according to the Associated Press.