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April 1, 2013

The Secret Player Who Could End ‘Too Big To Fail’


“The debate is raging on Capitol Hill over whether the era of ‘too big to fail’ banks has truly ended.  Now, one player has emerged who might finally answer the question that has dogged Wall Street and lawmakers ever since Lehman Brothers went belly up in 2008.

“It’s not a big name. Others have been in the spotlight when discussing whether the 2010 Dodd-Frank reforms actually reinforced taxpayer-funded safety nets for Wall Street, instead of removing them as intended.

“Attorney General Eric Holder indicated last month that criminal charges against a powerful bank might destabilize the markets. Fed Chairman Ben Bernanke conceded to reporters a few weeks ago that the problem of ‘too big to fail’ persists, even if regulators have made some progress in introducing new controls. “It is not solved and gone,” Bernanke said. “[It’s] a real problem and needs to be addressed if at all possible.”

“In the Senate, Democrat Sherrod Brown of Ohio and Republican David Vitter of Louisiana are pairing up on a new bill to limit the size of the country’s biggest banks. Dallas Federal Reserve Bank president Richard Fisher is crusading around the country with his own plan to do the same. Thomas Hoenig, vice-chairman of the Federal Deposit Insurance Corporation, penned an op-ed in last Friday’s Washington Post that the government subsidizes the nation’s largest banks.”



“It could be Berner’s work over his six-year term that determines whether ‘too big to fail’ is over or more dangerous than ever. The trouble is that the office—which is contained inside the Treasury Department—has been slow to get on its feet as the controversy smolders.

“They’ve been in the process of setting up for a couple of years,” explained Marc Jaruslic, a former Senate staffer who is now chief economist for Better Markets, an advocacy group pushing for tighter regulation. “I’d really like to see the OFR play the role intended for it in the statute. … We’re just missing a very important voice.””


Read full Fiscal Times article here

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