Wednesday, March 3, 2010
Federal Reserve Bank of Dallas President Richard Fisher Joins the Long List of Those Calling for Giant Banks to Be Broken Up
As Bloomberg notes:
Federal Reserve Bank of Dallas President Richard Fisher called for an international pact to break up banks whose collapse would threaten the financial system, a position that goes beyond other Fed officials.
While the international aspect of Fisher's proposal may be unusual, other Fed officials have also called for breaking up the TBTFs, including:
- Former chairman of the Federal Reserve, Alan Greenspan
- Former chairman of the Federal Reserve, Paul Volcker
As I noted in October, many others have also called for breaking up the banking giants:
The following top economists and financial experts believe that the economy cannot recover unless the big, insolvent banks are broken up in an orderly fashio
- Nobel prize-winning economist, Joseph Stiglitz
- Nobel prize-winning economist, Ed Prescott***
- Dean and professor of finance and economics at Columbia Business School, and chairman of the Council of Economic Advisers under President George W. Bush, R. Glenn Hubbard***
- Deputy Treasury Secretary, Neal S. Wolin
- The President of the Independent Community Bankers of America, a Washington-based trade group with about 5,000 members, Camden R. Fine
- The head of the FDIC, Sheila Bair
- The head of the Bank of England, Mervyn King
- The leading monetary economist and co-author with Milton Friedman of the leading treatise on the Great Depression, Anna Schwartz
- Economics professor and senior regulator during the S & L crisis, William K. Black
- Economics professor, Nouriel Roubini
- Economist, Marc Faber
- Professor of entrepreneurship and finance at the Chicago Booth School of Business, Luigi Zingales
- Economics professor, Thomas F. Cooley
- Former investment banker, Philip Augar
- Chairman of the Commons Treasury, John McFall
Others, like Nobel prize-winning economist Paul Krugman, think that the giant insolvent banks may need to be temporarily nationalized.
In addition, many top economists and financial experts, including Bank of Israel Governor Stanley Fischer - who was Ben Bernanke’s thesis adviser at MIT - say that - at the very least - the size of the financial giants should be limited.
The report was particularly scathing in its assessment of governments’ attempts to clean up their banks. “The reluctance of officials to quickly clean up the banks, many of which are now owned in large part by governments, may well delay recovery,” it said, adding that government interventions had ingrained the belief that some banks were too big or too interconnected to fail.This was dangerous because it reinforced the risks of moral hazard which might lead to an even bigger financial crisis in future.