The five biggest banks in the United States are too powerful and should be broken up, Dallas Fed President Richard Fisher said on Wednesday.Read the rest here.
"After the crisis, the five largest banks had a higher concentration of deposits than they did before the crisis," he said. "I am of the belief personally that the power of the five largest banks is too concentrated."
The U.S. Dodd-Frank reform and consumer protection act includes mechanisms for regulators to break up large financial companies, but imposes high hurdles for such action.
"The purpose of Dodd-Frank was to reduce the concentration of power and we have a term called 'too big to fail'... perversely, these banks are now even bigger, they are too 'bigger' to fail than before."
A rather rare moment where I agree with something coming out of the Federal Reserve. I have been arguing for the breakup of the megabanks since before the 2008 financial crisis.
3 comments:
And yet, Canada, with far greater banking concentration, goes happily along with almost no banking problems.
I'm unconvinced that more, smaller (presumably less resilient) banks makes for a stabler system.
Canada has very strict regulation of its financial services sector and banks are not allowed to do many of the really dicey things US banks routinely get away with. I recall in late 2008 when the US banking sector was on the verge of a 1930's style collapse and Canada's was unfazed one of the TV talking heads asked a Canadian banker to what he attributed the lack of crisis in their country's banks. He responded by saying "In Canada the government regulates the banks. In America the reverse is more the case."
Whatever happened to the anti-trust laws that were supposed to protect us from hainv companies "too big to fail"? Have they quietly been repealed somewhere along the way?
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