FDIC’s Shelia Bair is cautious on authority to break up “too big to fail” banks

November 24, 2009 by · Leave a Comment
Filed under: Policy News 

Looks like Chairman Bair is getting in line with the Administration’s thinking that breaking up the “too big to fail” banks.  They think it is better to regulate them or create “glass ceilings” for firms that are systemically important to the U.S. economy.   Jamie Dimon from JPMogranChase did an op-ed piece stating he would rather not get bailouts and fail then have artificial ceilings in place.  I wish this statement would of come out about 12 months earlier and then it would of garnered more creditability.

It uses interesting that Ms. Bair says she wants to deal with these large financial institution but does not seem to support downsizing or limiting what financial activities commercial banks can engage in oppose to investment banking institutions.  In my opinion to have a real market economy and functioning democracy, we can never have any organization that is “too big to fail” other than a handful of defence-contractors that are in our national security interest and even those companies should not be allowed to engage in business practices that make them a systemic risk to our economic livelihood.

Reuters, Washington D.C. – A top U.S. bank regulator on Tuesday said lawmakers need to be careful about moving forward with a proposal that could break up the largest financial institutions, while also voicing support for its objective.

Sheila Bair, chairman of the Federal Deposit Insurance Corp, said the proposal from Democratic Representative Paul Kanjorski is “a well-intentioned amendment.”

Kanjorski, whose amendment got approved by a House of Representatives committee last week as part of a bigger financial reform bill, has proposed giving the government power to break up financial firms that could threaten financial stability, even if they appear healthy.

“We share the same goal of ending ‘too big to fail’ and making sure that institutions cannot imperil the broader economy,” Bair told reporters during the FDIC’s quarterly bank earnings briefing.

But she also cautioned, “We need to be careful. I think there is a safety and soundness issue.”

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