End Too Big To Fail

Pass Glass-Steagall or Break up the Mega-Banks

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primary topic: Financial Regulation
secondary topics:


The conclusions drawn from this piece are solely that of aGREATER.US. Below is the introduction of a longer piece written by Harvey Rosenblum, the head of the Dallas Fed’s Research Department in the 2011 Annual Report of the Federal Reserve Bank of Dallas. It says about Mr. Rosenblum, "...a highly regarded Federal Reserve veteran of 40 years and the former president of the National Association for Business Economics."

"More than three years after a crippling financial crisis, the American economy still struggles. Growth sputters. Job creation lags. Unemployment remains high. Housing prices languish. Stock markets gyrate. Headlines bring reports of a shrinking middle class and news about governments stumbling toward bankruptcy, at home and abroad.

Ordinary Americans have every right to feel anxious, uncertain and angry. They have every right to wonder what happened to an economy that once delivered steady progress. They have every right to question whether policymakers know the way back to normalcy.

American workers and taxpayers want a broad-based recovery that restores confidence. Equally important, they seek assurance that the causes of the financial crisis have been dealt with, so a similar breakdown won’t impede the flow of economic activity.

The road back to prosperity will require reform of the financial sector. In particular,a new roadmap must find ways around the potential hazards posed by the financial institutions that the government not all that long ago deemed “too big to fail”—or TBTF, for short.

In 2010, Congress enacted a sweeping, new regulatory framework that attempts to address TBTF. While commendable in some ways, the new law may not prevent the biggest financial institutions from taking excessive risk or growing ever bigger.

TBTF institutions were at the center of the financial crisis and the sluggish recovery
that followed. If allowed to remain unchecked, these entities will continue posing a clear and present danger to the U.S. economy.

As a nation, we face a distinct choice. We can perpetuate TBTF, with its inequities
and dangers, or we can end it. Eliminating TBTF won’t be easy, but the vitality of our
capitalist system and the long-term prosperity it produces hang in the balance."

[Editor's note: The only argument I have heard to defend not breaking up the TBTF banks is for mercantile reasons. Other countries have "super" banks that can fund projects that could not get off the ground any other way. In-other-words we need to compete with other countries in the world market. However, consensus is rapidly forming that a consortium of regional banks, and/or even the Fed could be involved in monumental projects for the national interest. This leaves groups as diverse as the Tea Party and Occupy Wall Street in agreement over Ending Too Big To Fail. Systemically, why then has this not come to pass? Big Banks fund the (re)election of two-party candidates every election cycle. So, please consider not only rating this 5 Stars, but also "#ShouldElectedOfficials Stop Taking Money From Corporations They Regulate?" http://www.agreater.us/billpage.php?id=274 ]


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