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View Full Version : Dallas Fed Calls for Breakup of Banks to Big to Fail



Conley
03-21-2012, 05:32 PM
If you are running one of the “too-big- to-fail” (TBTF) banks—alternatively known as “systemically important financial institutions,” or SIFIs—I doubt you are going to like what you read in this annual report essay written by Harvey Rosenblum, the head of the Dallas Fed’s Research Department, a highly regarded Federal Reserve veteran of 40 years and the former president of the National Association for Business Economics.

Memory fades with the passage of time. Yet it is important to recall that it was in recog- nition of the precarious position in which the TBTF banks and SIFIs placed our economy in 2008 that the U.S. Congress passed into law the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank). While the act established a number of new macroprudential features to help promote financial stability, its overarching purpose, as stated unambiguously in its preamble, is ending TBTF.

However, Dodd–Frank does not eradi- cate TBTF. Indeed, it is our view at the Dallas Fed that it may actually perpetuate an already dangerous trend of increasing banking industry concentration. More than half of banking industry assets are on the books of just five institutions. The top 10 banks now account for 61 percent of commercial banking assets, substantially more than the 26 percent of only 20 years ago; their combined assets equate to half of our nation’s GDP. Further, as Rosenblum argues in his essay, there are signs that Dodd– Frank’s complexity and opaqueness may evenbe working against the economic recovery. In addition to remaining a lingering threat to financial stability, these megabanks signifi- cantly hamper the Federal Reserve’s ability to properly conduct monetary policy.

Read more: http://www.businessinsider.com/dallas-fed-calls-for-breakup-of-big-banks-2012-3#ixzz1pn0CvkHG

I know this will go over like a lead balloon in Washington but he's right. It's great to see someone in a position of power recognizing the absurdity of TBTF in a free market.

Conley
03-21-2012, 05:32 PM
* too

Peter1469
03-21-2012, 05:34 PM
The banks are so large they distort the free market. They should be broken up.

Vermouth
03-21-2012, 08:47 PM
I wish stories like this would get more attention. The argument of "too big to fail" didn't make much sense in 2008 and the government solution made the problem worse by further consolidating financial assets.

Conley
03-21-2012, 08:50 PM
Right - this is not the "free market" at all.

Peter1469
03-21-2012, 09:20 PM
I wish stories like this would get more attention. The argument of "too big to fail" didn't make much sense in 2008 and the government solution made the problem worse by further consolidating financial assets.

Hey V, long time no see.

Vermouth
03-22-2012, 08:58 PM
Hey V, long time no see.

Hiya Peter!