Regulating Too Big to Fail
Posted on Mar 20, 2010
Coming only a year too late to the party, Fed Chair Ben Bernanke has asserted that regulators must be “significantly tougher” on the large financial firms, arguing that the perception of those institutions as “too big to fail” threatens competition in the financial markets. —JCL
Regulators must be “significantly tougher” on large and complex financial firms to limit wider risks, but big firms are still needed to keep the global economy humming, Federal Reserve Chairman Ben Bernanke said on Saturday.
Bernanke told an Independent Community Bankers of America conference that the problem of some firms being perceived as “too big to fail” is among the “most insidious” barriers to competition in financial markets.
“As the crisis has shown, one of the greatest threats to the diversity and efficiency of our financial system is the pernicious problem of financial institutions that are deemed ‘too big to fail,’” he said.
“It is unconscionable that the fate of the world economy should be so closely tied to the fortunes of a relatively small number of giant financial firms,” he added.
Flickr / eflon
AIG is the exemplar of a “too big to fail” financial institution that did.