‘Too big to fail’ banks must be broken up – Fed official — RT
Published: 17 January, 2013, 16:36
TAGS:
Crisis, Banking, Global economy
Richard Fisher (Reuters / Jose Luis Magaua)
US “megabanks” with large toxic assets accumulated during the crisis should be split into smaller units, according to a senior Fed official. Thus they won’t be able to use the “too big to fail” excuse to get another government bailout.
“We recommend that TBTF (too-big-to-fail) financial institutions be restructured into multiple business entities,” Reuters quotes Richard Fisher, President of the Dallas Federal Reserve Bank.
The Fed official identified 12 “megabanks” with above $250bn in assets that could be classified as “too big to fail”. Among the so-called “behemoth” institutions are JPMorgan Chase, Bank of America, Goldman Sachs, Citigroup and Morgan Stanley.
Under the proposal only the commercial banking could rely on federal help, with such units as insurance or brokerage relying on their own resources. Customers of banking businesses other than commercial would need to sign an official disclaimer, proving they understand the risks. Fisher didn’t specify the exact limits for the size of the banks, saying that would be up to market forces.
“They [huge banks] should completely separate investment banking from commercial banking, that’s the only thing that matters. Otherwise commercial banks are run by hedge funds which is crazy,” agreed Robert Allen, professor of Economic History at Oxford University, talking to Business RT.
On a global scale, the biggest central banks have injected above $11tn into the world financial system since the start of the financial crisis in 2007, according to Wall Street Journal (WSJ) calculations. A lion’s share of this money has been aimed to help banking giants remain afloat
While representing just 0.2% of the country’s total 5,600 banks, this dozen “megabanks” account for 69% of all US banking assets.
Spending billions on the rescue of a handful of banks creates “an unfair tax” on ordinary people and prevents monetary policy from working smoothly, Fisher concluded.
Tired by the need to inject massive amounts of money to help huge lenders out of a bankruptcy, monetary authorities across the globe have already started to urge banks towards better self-sufficiency. Stress tests aimed at identifying whether a lender would have enough funds to cope with an unexpected shock now seem to be turning into regular practice. Most recently, the Central Bank of Russia (CBR) said it would release recommendations for the country’s lenders on how to create ‘emergency plans’ in case of another banking crisis. CBR wants Russian banks to make up such plans to be sure they will have enough reserves and planning to tackle a crisis without state aid.
‘Too big to fail’ banks must be broken up – Fed official — RT.
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Reblogged this on All About 2012.
The time has come to have the banks break up. For today they service them self and the rich one percent. They do believe they are above the law and the people site back and say nothing they listen to there congress tell them all is ok. We the people must get more involved if we are to see real change.
They broke up Standard Oil. It did nothing to stop the monopoly. It just hid ownership. How long will it be before we start sharing and stop pretending this heartless system could ever give us what we want?
Reblogged this on Spirit In Action and commented:
It is amazing to me that in a few decades the very existence of the RICO act and similar legislation such as was used to break up At&T into the “baby bells” in the early 90′s is just erased. The Fed “suggests” they should be broken up-why was the govt not enforcing RICO 10 years ago BEFORE the mess? I know history is a real hard subject for Americans who don’t like to recall how their country was created and who go all the way thru school to college before any classes teaching history newer than World War I are encountered, but the people in Congress are OLDER than me and I remember the AT&T breakup-one assumes they learned this stuff in law school, or they have some staff at the Capitol that explains it to them, right? Banking, Oil, Communications corporations and Big Ag are ALL bigger than AT&T was (and they all get HUGE government subsidies) when the government cracked down on them in the late 70′s under Carter….oh wait!~ that must be why, we haven’t had a verifiable ethical person in politics outside of Kucinich and Paul SINCE Carter, have we?;-/
Reblogged this on Streets of Love – unconventional and commented:
SHUT THEM DOWN NOW!
“The Fed official identified 12 “megabanks” with above $250bn in assets that could be classified as “too big to fail”. Among the so-called “behemoth” institutions are JPMorgan Chase, Bank of America, Goldman Sachs, Citigroup and Morgan Stanley.”
Angel Lucci
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