Home > DocuBase > Article

« All DocuBase Articles

 

Friday, 8th January 2010

Observations on the Problem of “Too Big to Fail/Save/Resolve”

Observations on the Problem of “Too Big to Fail/Save/Resolve”
Source: Levy Economics Institute at Bard College

Past experience suggests that multifunctional banking is the leading source of financial crisis, while large bank size contributes to contagion and systemic risk. This indicates that resolving large banks will not solve the problems associated with multifunctional banking—a conclusion reached after every financial crisis, and one that should apply to the present crisis as well. Senior Scholar Jan Kregel observes that it is important to recognize that past solutions may not be appropriate for present conditions. The approach to the current financial crisis has been to resolve small- and medium-size banks through the FDIC, while banks considered “too big to fail” are given direct and indirect government support. Many of these large government-supported banks have been allowed to absorb smaller banks through FDIC resolution, creating even larger banks. As these institutions repay their direct government support, the problem of “too big to fail” is simply aggravated. Thus, the current thrust of government regulatory reform—increased capital and liquidity requirements, and further legislation—is unlikely to lessen the systemic risks these institutions pose.

+ Full Paper (PDF; 103 KB)


Category:

Source:




Please note: DocuTicker's editors collect citations for full-text PDF reports freely available on the web but we do not archive these reports. When you click a link to find and/or download the report, you are leaving the DocuTicker site. DocuTicker makes no representations regarding the ongoing availability of any report or any external resource. Links were accurate as of the date of posting.

« All DocuBase Articles







 

 
 
 

Article Categories

All Article Categories »

Sources

All DocuBase Sources »

Source Categories

All Source Categories »

Archive

All Archives »