“Too big to fail” must end for all according to FDIC’s chairman Sheila Bair

October 4, 2009 by · Leave a Comment
Filed under: Policy News 

I agree with this policy but having it actual becomes practice is another.  Problem is that letting large firms at this time is not politically feasible currently.  We have administration that is filled with financial insiders that did everything they could to prevent any of these firms from failing under the fear-driven threat that the entire economic system would collapse if we did not bail them out fully other than a few players that we obviously not as “politically connected” as the most established firms.  I still believe that if we would of let capitalism take its course we would of have a speedy downturn and much of this bad debt would of been defaulted on and that would of brought back confidence in markets and we would be seeing real job driven growth in the coming year.

Instead, we have pledged our nations credit to bail out system out without any guarantee that we actually recovering and it looks like we will not see any real structural change or oversight that might prevent this type of reckless leverage to happen again.  We need our representatives to show real leadership and enforce our existing rules on the books and investigate all the obvious fraud that has happened and set the proper precedence for future generations.

Reuters, Istanbul – The head of the U.S. Federal Deposit Insurance Corp. said on Sunday that she wanted to end the “too big to fail” doctrine and shrink the shadow banking system that operates outside the reach of regulators.

FDIC Chairman Sheila Bair, speaking to the Institute of International Finance meeting here, said a U.S. proposal to create the authority to shut down failing systemically important financial firms may need to be extended to insurers and hedge funds.

“We need to end ‘too big to fail’ and this needs to be an overarching policy that applies to everyone,” Bair said.  Bair said she believed that bank holding companies with subsidiaries that are shut down by regulators also should be made to pay the price of failure by being subject to the same wind-down process.

“I believe that the new regime should apply to all bank holding companies that are more than just shells and their affiliates regardless or not whether they are considered to be systemic risks,” she said, adding that including only systemically important firms in the shut-down regime could reinforce the ‘too big to fail’ doctrine.

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