Skip to main content

Newsroom

January 31, 2013

Can We Put the 'Too Big to Fail' Genie Back in the Bottle?

It’s another way into the “too big to fail” debate, but rather than focus on breaking up the big banks, this discussion centers squarely on what, exactly, the government should guarantee.

The thinking is simple: if policymakers made it crystal clear that the government only stands behind traditional commercial banks, then the market would discipline the companies and activities outside the safety net.

Without the expectation of a bailout, investors and customers would require higher capital and that in turn would constrain the growth and risk-taking of companies or lines of business that operate outside the safety net. The scope of regulation could shrink because we’d only have to police what we backstop, and moral hazard would finally start to recede.

That all sounds great, but can policymakers take us from here to there? Can they really put the TBTF genie back in the bottle?”

 

***

Read full American Banker article here (subscription required)

In the News
Share

MEDIA REQUESTS

For media inquiries, please contact us at
press@bettermarkets.org or 202-618-6433.

Contact Us

For media inquiries, please contact press@bettermarkets.org or 202-618-6433.

To sign up for our email newsletter, please visit this page.

Name(Required)
This field is for validation purposes and should be left unchanged.

Sign Up — Stay Informed With Our Monthly Newsletter

This field is for validation purposes and should be left unchanged.

For media inquiries,

please contact press@bettermarkets.org or 202-618-6433.

Donate

Help us fight for the public interest in our financial markets, protecting Main Street from Wall Street and avoiding another costly financial collapse and economic crisis, by making a donation today.

Donate Today