Today in class we talked about "too big to fail" so I found a relevant article. Federal Reserve governor Jerome Powell acknowledged that the issue 'too big to fail" hasn’t been resolved. However, he stated that: “The too-big-to-fail reform project is massive in scope. In my view, it holds real promise. But the project will take years to complete. Success is not assured”
What do you think? Do you think this reform project is promising? What regulations should be changed under Obama administration to save business from collapsing?
I think this article is most interesting in light of Koo's arguements in favor of big banks.
ReplyDeleteIt changed my perspective to some degree-Because we really truly do need big banks as a nation. They have economies of scale (obviously) and help to redistribute the nation's wealth and funnel it into financial instrumentation. This whole notion of greedy cigar-filled rooms of bankers is a characature of the way things often are.
The main reforms that have been taken in success denote new 'bank reserve' ratios. By requiring the bank to have more money in reserve, it assures that if things go south, they will have more of the necessary capital to survive. 'A sinking-fund' if you will- With increased depth because of the Obama administration reforms.