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January 18, 2013

At last – how America can solve the ‘too big to fail’ problem

Senators from opposite ends of the US political spectrum are finally asking the question that should have been answered before Dodd-Frank became law: how big is “too big to fail”?

Democrat Sherrod Brown and Republican David Vitter have asked the General Accountability Office, the investigative agency of the US Congress, to quantify the subsidy too big to fail banks receive from what are in effect taxpayer guarantees.

The subsidy is the funding advantage that the banks receive because their creditors know they will be made whole in the event of financial stress, just as creditors were during the financial crisis.”

 

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Read William Isaac’s and Cornelius Hurley’s opinion piece in the Financial Times here

 
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