Dallas Federal Reserve Branch Calls for Breakup of Big Banks

[Sutter Cane]

Dallas Federal Reserve Branch Calls for Breakup of Big Banks

The bank has just released its annual report, and the title of the letter is: Choosing the Road to Prosperity Why We Must End Too Big to Fail—Now.

Some excerpts from the letter from Dallas Fed President Richard Fisher, who the article states is "generally known as one of the most hawkish and conservative Fed Presidents" below. I emphasized a few phrases, but you'll probably want to read the whole thing:

More than half of banking industry assets are on the books of just five institutions. The top 10 banks now account for 61 percent of commercial banking assets, substantially more than the 26 percent of only 20 years ago; their combined assets equate to half of our nation’s GDP. Further, as Rosenblum argues in his essay, there are signs that Dodd– Frank’s complexity and opaqueness may even be working against the economic recovery. In addition to remaining a lingering threat to financial stability, these megabanks significantly hamper the Federal Reserve’s ability to properly conduct monetary policy.

They were a primary culprit in magnifying the financial crisis, and their presence continues to play an important role in prolonging our economic malaise. There are good reasons why this recovery has remained frustratingly slow compared with periods following previous recessions, and I believe it has very little to do with the Federal Reserve.

Perhaps the most damaging effect of propagating TBTF is the erosion of faith in American capitalism. Diverse groups ranging from the Occupy Wall Street movement to the Tea Party argue that government-assisted bailouts of reckless financial institutions are sociologically and politically offensive. From an economic perspective, these bailouts are certainly harmful to the efficient workings of the market.

It is imperative that we end TBTF. In my view, downsizing the behemoths over time into institutions that can be prudently managed and regulated across borders is the appropriate policy response. Only then can the process of “creativedestruction”— which America has perfected and practiced with such effectiveness that it led our country to unprecedented economic achievement— work its wonders in the financial sector, just as it does elsewhere in our economy. Only then will we have a financial system fit and proper for serving as the lubricant for an economy as dynamic as that of the United States.

Hmmmm.

[Sutter Cane]

Re: Dallas Federal Reserve Branch Calls for Breakup of Big Banks

Possibly too-cynical interpretations:

a.) Calls of "End the Fed" from differing corners of the political spectrum (that usually agree on nothing) are causing the Fed to position itself for it's own survival. By throwing TBTF institutions under the bus in order to save itself?

Or

b.) Those that run TBTF institutions have all the money now, and no longer care if the institutions themselves survive. Or if they will no longer be able to run the same cons. Now that the burglary is complete and the house has been ransacked, who cares if somebody locks the door on the way out?

[lektrode]

Re: Dallas Federal Reserve Branch Calls for Breakup of Big Banks

Hmmmm.

Possibly too-cynical interpretations:

... Now that the burglary is complete and the house has been ransacked, who cares if somebody locks the door on the way out?

good point/question (i have same thots re: dodd-frank: too little, too damn late and after they/TBTF bought/paid for from the prev congress the best outcome our money could buy)

but first off, let me say: thank the gods for the state of texas (and their fed guy)
without them, the whole notion of 'america' would've been/had a vastly different result (whether thats a good thing or not, is subject to debate, but personally I LIKE DRIVING MY OWN oil-fueled CAR (chevy) TO THE SUPERMARKET AND EATING BEEF, so hey - feel free to dump on me for that, but i'm not apologizing...)

that said, here's my .02: BEST NEWS WE'VE SEEN TO DATE!

More than half of banking industry assets are on the books of just five institutions.

and what ever happened to antitrust action?
COULD YOU JUST IMAGINE IF A SIMILAR THING HAD HAPPENED IN THE OIL BIZ (in such a short time ;) ?
never mind if the oil industry had single-handedly krushed the entire world economy, caused 90% of the US construction industry to shutdown, wiped out the US auto industry, caused millions of US families to become homeless, millions of people to lose any hope of ever having a middle class lifestyle - EVER AGAIN??

could you just imagine the uproar there would've been in washington???

and what happened?

hahahahahaha!!!!!!

ZILCH is whats happened, beyond the TBTF paying themselves yet more B I L L I O N S
to 'save the economy' that they themselves wrecked AT OUR DIRECT EXPENSE!
while essentially none of them have paid any real price for it all?

and when a movie like INSIDE JOB can detail all of it so clearly and yet NOTHING from the dept of 'justice', never mind antitrust - i mean chrikie mate, even Netscape got more attention than this????

The top 10 banks now account for 61 percent of commercial banking assets, substantially more than the 26 percent of only 20 years ago; their combined assets equate to half of our nation’s GDP. Further, as Rosenblum argues in his essay, there are signs that Dodd– Frank’s complexity and opaqueness may even be working against the economic recovery. In addition to remaining a lingering threat to financial stability, these megabanks significantly hamper the Federal Reserve’s ability to properly conduct monetary policy. They were a primary culprit in magnifying the financial crisis, and their presence continues to play an important role in prolonging our economic malaise. There are good reasons why this recovery has remained frustratingly slow compared with periods following previous recessions, and I believe it has very little to do with the Federal Reserve.

DONT EVEN GET ME GOING (anymore than already) about how lame/useless as tits on a bull the D-F fiasco is, its the same as the 'healthcare overhaul' - but what would/could we expect from the lawyers party...

but howz about the issue of: ZIRP and what its doing to those of us who were prudent, spent less than we make and SAVED our money so we might have a better future - HOW DOES ZIRP HELP US???

Perhaps the most damaging effect of propagating TBTF is the erosion of faith in American capitalism. Diverse groups ranging from the Occupy Wall Street movement to the Tea Party argue that government-assisted bailouts of reckless financial institutions are sociologically and politically offensive. From an economic perspective, these bailouts are certainly harmful to the efficient workings of the market.


It is imperative that we end TBTF.

how much clearer/concise/straightfoward does it need to get than that?
too bad the dude is from texas tho, the other clowns up north/westcoast/chi will no doubt vote against him!

In my view, downsizing the behemoths over time into institutions that can be prudently managed and regulated across borders is the appropriate policy response. Only then can the process of “creativedestruction”— which America has perfected and practiced with such effectiveness that it led our country to unprecedented economic achievement— work its wonders in the financial sector, just as it does elsewhere in our economy. Only then will we have a financial system fit and proper for serving as the lubricant for an economy as dynamic as that of the United States.

maybe theres 'hope for some change' yet.

its the "over time" part that worries me tho...

/rant