Fed Chief calls for breakup of ‘Too Big to Fail’ Banks

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Dallas Fed chief calls for breakup of ‘too big to fail’ banks in New York speech

BRENDAN CASE, The Dallas Morning News – March 4, 2010

Federal Reserve Bank of Dallas President Richard Fisher traveled to New York to trumpet a message he’s told Texas audiences before: Banks that are too big to fail are too big to exist in the first place.

Speaking Wednesday at the Council on Foreign Relations, Fisher said big, systemically important banks should be dismantled before regulators have to deal with another crisis like the one that nearly brought down Wall Street and the rest of the U.S. financial system in late 2008.

The dangers posed by too-big-to-fail banks are too great,” he said.

Fed Chairman Ben Bernanke and others have said Congress should pass a law giving regulators “resolution authority” to close down failing financial companies.


That is Good News, sort of.

Finally a Federal Reserve official is admitting that Banks ‘Too Big to Fail’ could be ‘Too Big to Exist’.

It’s About Time! What took them so long?

Listen to the Fed’s Richard Fisher dismantle the Talking Points, arguing to keep the Banking Status Quo:

Fed’s Fisher: Must Break up Banks That Are Too Big

Pedro Nicolaci da Costa, ABCNews — March 3, 2010

I align myself closer to Paul Volcker in this argument and would say that if we have to (break up banks) unilaterally, we should,” Fisher said.

He said the arguments for maintaining the current system, which include sustaining the global competitiveness of U.S. financial firms, is weak at best, citing Japan’s experience.


Some lawmakers have criticized the Fed for being too hands-off in its approach to supervision, thereby allowing troubles to fester that eventually led to the worst crisis since the Great Depression.


And now for the Not-So-Good News …

Those guys in charge of beefing up the Regulations to oversee the Wild West Poker Game — those “wise guys” have a little “ownership” problem themselves!

How Wall Street and Its Backers on Capitol Hill Silenced a Critic Calling for Greater Regulation of Derivatives

DemocracyNow.org – November 02, 2009

AMY GOODMAN: What do you mean the people who have always been in power are still in power? I thought a new administration was elected last year.

ROBERT JOHNSON: We’ve got a new administration, but we have the funders from the four or five largest banks — Citibank, JPMorgan, Goldman Sachs. JPMorgan, I understand, has hired many of the lobbyists that used to represent Freddie Mac and Fannie Mae. The amount of money they’re spending has induced Dick Durbin from Illinois to say the banks own this place. So it’s really the lobbyists and the executives of the financial sector that I’m talking about.


AMY GOODMAN: What were you trying to say in the Senate Finance Committee and the House Finance Committee hearing?

[… when your] testimony was cut short after five minutes by Congresswoman Melissa Bean, and the committee has since refused to post online his full testimony along with the statements of the other panelists. [… ??? ]

ROBERT JOHNSON: What I was trying to say is that Ground Zero, the San Andreas Fault of our financial system, where it blew up last time, was in the intersection between “too big to fail” firms and over-the-counter derivatives and that these derivatives need to be put on exchanges, because they’re too complex, and when they’re combined with the “too big to fail” firms […]


As long as the Big Banks continue to “own the place” through their Lobbyists and contributions, it probably won’t matter much what Fed Chiefs might say. As long our Senators, have a “vested interest” in the outcome of their Banker’s Bets — then the American People will always end up — PICKING UP THE TAB — when those ‘Too Big to Fail’ Bets inevitably go bad.

Bankers must be forced (legally) to take on their own RISKS — whenever they Lose — afterall they have NO problem, taking all those GAINS, whenever they Win!

It’s only fair — especially since their Derivative Bets are usually done with 30 to 1 Margins, or more. (and under cloak on back-room deals, far from any Regulator Oversight.)

It’s little wonder those Big Bankers, feel the need to ‘buy off’ the Refs. It’s because it’s such a Publicity Pain whenever those ‘Margins Calls’ finally come due.

“Buying off the Refs” (or the Senate) is a small price to pay, when SO much Real Collateral is on the line.


    • jamess on March 5, 2010 at 02:05

    Shouldn’t our Reps start protecting our interests?

  1. and doing the complete opposite getting old? I for one am tired of the continual rhetoric.

    By their deeds you shall know them

    The U.S., in effect stared near-catastrophe in the eye, with LTCM, and decided to double down.”

    Jim Rickards, the general counsel for LTCM states:

    “What strikes me now, looking back, is how nothing was changed: no lessons were applied. Even though the lessons were obvious, in 1998. LTCM used fatally flawed VaR risk models. LTCM used too much leverage. LTCM transacted in unregulated over-the-counter derivatives instead of exchange traded derivatives…

    The only game in town is rigged and designed to keep the wealthy rich and in power. There is no will to change anything at this point. This criminal syndicate will need to be forcibly removed. Sorry but I am pissed!  

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