Wednesday, May 22, 2013

Too Big To Fail Banks Getting Bigger

I remain frustrated that "too big to fail" banks that bear a large brunt of the blame for the "Great Recession" have not faced any consequences. I'm more frustrated by the fact that big banks have gotten bigger. Massachusetts Senator Elizabeth Warren shares my frustrations as her questioning of Treasury Secretary Jack Lew illustrates.



Erika Eichelberger from Mother Jones summarizes a key part of the exchange:
"Let me try the question a different way," Warren persisted. "How big do the biggest banks have to get before we consider breaking them up?" she asked, adding that the largest American banks are 30 percent larger than they were five years ago. "Do they have to double in size? Triple in size? Quadruple in size? Before we talk about breaking up the biggest financial institutions?"
Lew said that too big to fail "is an unacceptable policy", but urged Warren to have some patience.
She'd have none of Lew's excuses: "What we've seen… is one scandal after another in these largest financial institutions," she said. "It's clear they have not changed their risk bearing practices nor have they decided that they're suddenly going to start following the law."
I've posted about "too big to fail" before and Troy Jones always stops by to explain that Dodd Frank will make matters worse. He may be correct, the fact that I teach is South Dakota is evidence that I lack financial acumen.It does seem, however, that those in charge of regulating large banks are content to do nothing. In this situation, doing nothing definitely makes matters worse.

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