Banks are still “Too Big to Fail”

Author: Nishant Sheth

After the recent financial crisis the idea of the “Too Big to Fail” concept were rampantly discussed. They have now come back into the news through a recent article on the Federal Reserve Bank of Dallas. The recent report included very critical words on the “megabanks” of today. It talked about how even with this crisis banks still remain far too large. Banks still remain too difficult to regulate and America hasn’t seen enough overhaul in policy, is the reports premise. The banks of today still look too much like they did pre-2008. The Occupy movement shed a lot of light on moral hazard and loss of credibility on the part of the banks. However, the fact that top Federal Reserve officials feel this way is even more powerful. The Dallas Fed feels as if a lot of the policy such as the Dodd-Frank act has not had enough impact. Another issue brought up, was the fact that too much decision making lyses within the Treasury secretary and that the Fed does not have enough involvement. They feel that they are more of a neutral entity but being regional critics do not receive enough regulatory power. Mr. Fisher, the Dallas Fed president has been fierce on inflation. He was not in accordance wit the Fed’s actions in terms of “quantitative easing”. The top bank regulators at the Fed have embraced unorthodox monetary policies and have not commanded any overhaul of the current system. Many of these regional Fed’s want to break these large banks into smaller ones. They also argue that small banks get hurt when the large ones are bailed out. What do you guys think about current Federal Reserve Policies? Why haven’t we made more significant inroads in regulation since 2008?

New York Times Article: http://dealbook.nytimes.com/2012/03/28/banking-regulator-calls-for-end-of-too-big-to-fail/?src=busln