A list of people who are wary of "too big to fail"


The methods for what could end "too big to fail" are complex, but we believe that one idea with merit is to make the banks smaller.
This could be acheived in many ways: 1) putting a cap on bank size, relative to GDP, 2) separating investment and commercial banking, 3) separating insurance and mortgage lending, 4) taxing banks that get bigger than a certain threshold, and—most importantly—5) encouraging citizens to leave "too big to fail" banks and instead support local lenders

Here is a small handful of the many people who have spoken out on this issue. All of these quotes come after the 2008 crisis.

Anat Admati, economics professor at Stanford: “We're not safer and there's still a lot of systemic risks in large banks and in the financial sector overall."

Phil Angelides, Chair of the Financial Crisis Inquiry Commission: “Banks can do the trading they want, but those kind of institutions shouldn't be backed up by the taxpayers of the United States. And they shouldn't be of a scale where they're too big to fail and systemically important that we have to ride to their rescue.”

Sheila Bair, former FDIC Chair, has said that “even with very good management these institutions are just too big to manage.”

Dean Baker, economist at the Center for Economic and Policy Research: “A break-up of the big banks will at least give the country some hope that things can change. As it stands now, the big banks are back on their feet, and in some cases more profitable than ever, feasting on the now explicit government guarantee of support in the event of a crisis.”

Neil Barofsky, former Inspector General for TARP: “Pretending that Dodd-Frank solved all our problems, as some Democrats do, or simply saying that big banks won’t be bailed out again, as some Republicans have suggested, is unrealistic. Congress needs to proactively break up the “too big to fail” banks through legislation.”

Tony Dophin, economist and director at IPPR: "The best way to increase competition in the financial sector would be to break up the banks."

William Dudley, NY Fed Chair: "We are a long way from the desired situation in which large complex firms could be allowed to go bankrupt without major disruptions to the financial system and large costs to society."

Erick Erickson, managing editor of RedState.com: "It is absolutely a conservative imperative to break up the big banks. Conservatism should eschew public-private partnership at this level. The banks have, in effect, become an extension of the government in that they now exist in a wholly symbiotic and unhealthy relationship with Washington. If we want smaller government, we need smaller banks too."

Niall Ferguson, Harvard history professor: "Right now we don't need a charade in which politicians claim they are going to regulate the big banks more tightly. ... What's needed is a serious application of antitrust law to the financial-services sector and a speedy end to institutions that are "too big to fail."

Camden Fine, president of ICBA: "Consolidation in the banking industry and the emergence of financial institutions with explicit government guarantees against failure haven't exactly contributed to an economic boom. It's been just the reverse—they triggered an economic collapse."

Richard Fisher, president of the Dallas Fed: “Given the danger these institutions pose to spreading debilitating viruses throughout the financial world, my preference is for a more prophylactic approach: an international accord to break up these institutions into ones of more manageable size—more manageable for both the executives of these institutions and their regulatory supervisors.”

Andrew Haldane, executive director, Bank of England: "Have we solved 'too big to fail'? No. That's not my pessimistic verdit; it is the market's. ... Too-big-to-fail is far from gone. It is even more important it is not forgotten."

Thomas Hoenig,  FDIC Chair: “Looking back, one sees that the crisis was inevitable, if for no other reason than that these TBTF firms would push the boundaries until there was a crisis.”

Jon Huntsman, former governor of Utah: "Today we can already begin to see the outlines of the next financial crisis and bailouts. More than three years after the crisis and the accompanying bailouts, the six largest U.S. financial institutions are significantly bigger than they were before the crisis."

Simon Johnson, economics professor at MIT: "The structural problems are worse. Their size, incentives—none of that has changed."

Mervyn King, governor of the Bank of England: "It is hard to see how the existence of institutions that are “too important to fail” is consistent with their being in the private sector. Encouraging banks to take risks that result in large dividend and remuneration payouts when things go well, and losses for taxpayers when they don’t, distorts the allocation of resources and management of risk."

Arnold Kling, CATO scholar: “My biggest objection to large financial institutions continues to be what I see as the inevitable collusion of politics and economics that results. When large banks have resources, politicians will be tempted to treat them as piñatas, taking whacks at them in order to extract money to distribute to constituents …. When large banks get in trouble, politicians will be tempted to bail them out.”

David Komansky, former Merrill Lynch CEO: "Unfortunately, I was one of the people who led the charge to get Glass-Steagall repealed. As I sit here today, I regret those activities and wish we hadn't done that."

Michael Lewis, author: "I look at the financial system as it is now, and it feels like it's built on sand. We did not cure the problem of too big to fail. Institutions have gotten bigger."

Gretchen Morgenson, financial editor NYTimes: “Big banks are bigger than ever, and they exert enormous power over regulators and lawmakers. Increasingly, smaller institutions can’t compete.”

Peggy Noonan, WSJ columnist: "Too big to fail is too big to continue. The megabanks have too much power in Washington and too much weight within the financial system."

James Pethokoukis, writer for AEI, "Breaking up the biggest banks would allow markets to work better, by cutting down on crony capitalist rent-seeking by big money from big government."

Phil Purcell, former Chairman and CEO of Morgan Stanley: "There is one benefit of breakups that hasn't gotten much publicity: Shareholders would get greater value from their investments."

Robert Reich, economist at Berkeley: "We did it to the giant oil companies a century ago because they were too powerful, economically and politically. It's time to apply the same medicine to Wall Street."

Wilbur Ross, CEO of WL Ross & Co: “Running an insurance company is not the same thing as running a retail bank. We don't think there's any logic in them being in the same entity.”

Nouriel Roubini, economics professor at NYU: “These institutions know they’re large, they know they’ve been bailed out once, and they know that if they get in trouble they’re going to be bailed out again.”

Roy Smith, former partner at Goldman Sachs: "Based on changing markets and increasing regulatory pressures, it is time to unwind the mega-banks into smaller, simpler, less risky business models."

Joseph Stiglitz, economist at Columbia University: “You look at the "too big to fail" banks, and you look at their incentive structures. They know that they're too big to fail, so if they gamble and win, they walk off with the profits.”

Paul Volcker, former Fed chair: "There is an expectation that very large and complicated financial institutions will not be allowed to fail. Unless that conviction is shaken, the natural result is that risk-taking will be encouraged and in fact subsidized beyond reasonable limits."

David Wessel, WSJ editor: "Basically the problem is this: The biggest banks are bigger today by any measure than they were before the crisis, and it's an open question whether you need to be bigger in a global economy, or whether they're bigger because investors assume that the government will bail them out if they get into trouble like it did the last time."

Sandy Weill, former Citi CEO: “What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail.”

George Will, Washington Post columnist: "Capitalism—which is, as Milton Friedman tirelessly insisted, a profit and loss system—is subverted by TBTF, which socializes losses while leaving profits private."

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@swiftj tweeted link to this page. 2012-11-29 17:14:24 -0700
Here's a long list of people saying "too big to fail" is still a problem. Who should we add to the list? #TBHF http://t.co/mnXl9QqB