bobbyw24
03-03-2010, 01:07 PM
Wednesday, 03 Mar 2010 08:17 AM
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Banks that are seen as too large to fail should be broken up in order to make the financial system more stable, Dallas Federal Reserve President Richard Fisher said on Wednesday.
In his most explicit call yet for reshaping the financial industry, Fisher said markets could only function properly if institutions that take big risks are allowed to go under.
His comments come as Washington debates financial regulatory reform, which some analysts worry has become too watered down to prevent another financial crisis.
Fisher called for an international agreement to break up oversized firms.
"The disagreeable but sound thing to do regarding institutions that are too big to fail is to dismantle them over time into institutions that can be prudently managed and regulated across borders," Fisher said in prepared remarks to the Council on Foreign Relations.
One prominent proposal for reform, known as the Volcker rule after Paul Volcker, the former Fed chairman and White House economics adviser who devised it, would limit taxpayer backing for banks whose primary activities are speculative in nature.
"I align myself closer to Paul Volcker in this argument and would say that if we have to (break up banks) unilaterally, we should," Fisher said.
He said the arguments for maintaining the current system, which include sustaining the global competitiveness of U.S. financial firms, is weak at best, citing Japan's experience.
http://moneynews.com/StreetTalk/Fed-Fisher-Banks-Fail/2010/03/03/id/351468
Fisher used the forum to add his voice to the chorus of Fed officials vying to maintain the central bank's regulatory authority, which has come under threat from key proposals in Congress.
Article Font Size
Banks that are seen as too large to fail should be broken up in order to make the financial system more stable, Dallas Federal Reserve President Richard Fisher said on Wednesday.
In his most explicit call yet for reshaping the financial industry, Fisher said markets could only function properly if institutions that take big risks are allowed to go under.
His comments come as Washington debates financial regulatory reform, which some analysts worry has become too watered down to prevent another financial crisis.
Fisher called for an international agreement to break up oversized firms.
"The disagreeable but sound thing to do regarding institutions that are too big to fail is to dismantle them over time into institutions that can be prudently managed and regulated across borders," Fisher said in prepared remarks to the Council on Foreign Relations.
One prominent proposal for reform, known as the Volcker rule after Paul Volcker, the former Fed chairman and White House economics adviser who devised it, would limit taxpayer backing for banks whose primary activities are speculative in nature.
"I align myself closer to Paul Volcker in this argument and would say that if we have to (break up banks) unilaterally, we should," Fisher said.
He said the arguments for maintaining the current system, which include sustaining the global competitiveness of U.S. financial firms, is weak at best, citing Japan's experience.
http://moneynews.com/StreetTalk/Fed-Fisher-Banks-Fail/2010/03/03/id/351468
Fisher used the forum to add his voice to the chorus of Fed officials vying to maintain the central bank's regulatory authority, which has come under threat from key proposals in Congress.