Sheila Bair, FDIC Chief: "Too Big To Fail" Must End For All

nytimes.com:

The head of the U.S. Federal Deposit Insurance Corp. said on Sunday that she wanted to end the "too big to fail" doctrine and shrink the shadow banking system that operates outside the reach of regulators.

F.D.I.C. Chairman Sheila Bair, speaking to the Institute of International Finance meeting here, said a U.S. proposal to create the authority to shut down failing systemically important financial firms may need to be extended to insurers and hedge funds, Reuters reported.

Read the whole story: nytimes.com

Comments

[sonofsamphm1c]

She is not arguing companies should not be big. She is saying the resolution authority that Obama/Geithner are asking for should be used to unwind companies that present a systemic risk.

So put away your little fantasies of breaking up Wall Street into little bits. In terms of managing systemic risks, it would do absolutely no good.

[JoshPr]

I predict there will be no reform or change and Obammi will discourage his followers, hence losing 2012. Dems will also lose a lot of seats in the house in 2010.

good articles; http://iamned2.blogspot.com

Obama= fail

[outnow]

Too big to fail is the means to use extortion on the financial system. This madness must end immediately.

I'm sure that road engineers would not create a hazard so that a toll could be charged or you would go over a cliff. Or, a supermarket who would sell you the antidote to a poison they just put into your food.

These tyrannts and their bought-and-sold politicians need to have their feet held to the fire. Extortion is a serious felony. Break up the trusts and the mega-corporations so there is real competition and no more bailouts of banks. Get rid of the shadow anything, including government.

[xilduq]

Oh, it'll end alright (for ALL of us). The end is near.

[ImissBush]

does she believ in fairies 2?

[denlong]

I think fairies are our best hope! Bernanke and Summers pay lip service to ending "too big to fail" yet no one is planning to break up Goldman or BofA

[ImissBush]

agreed the institutions r even biggr now

so even less competition
& US is blockin limitin bonuses or more controls on these insttutions

[pakaal]

I see this as a Free-market Capitalist vs Socialist situation. Free-market Capitalism would laugh at the idea that any company is too big to fail, that goes against the whole concept of market competition. If a company is inefficient, badly run, it should fail. Supporting a company that isn't doing well because the economic fallout to the people and the country would be "too devastating" is inherently Socialistic.

Neither word have pejorative connotations for me since the problems don't lie with any political system but rather the greedy, petty humans who run the system. Personally, I would have let the institutions fail. We needed a reboot, not cosmetic surgery.

[RadCenter]

How would you propose to remediate the human carnage left behind by your cavalier laissez-faire approach? All of those elderly folks losing their retirement funds, churches and other charities losing their endowments—that's just fine with you, eh?

[pakaal]

Actually no, it's not. As I said, it's people that screw things up, not any political system in particular.

As to the "cavalier laissez-faire approach," first of all it's not "mine" it's the one that the US uses. I'm pointing out how the free-market system is supposed to work to maximize efficiency. The bottom line of any business is to make profit, that's how the system is supposed to work, and if the business is inefficient, it fails. We could easily argue that having them fail would have led to a more efficient system taking its place.

As for charities and churches losing their endowments, well, most of them have, in case you didn't notice. The small investors were the ones really screwed by this debacle, and that was EVEN THOUGH we bailed out these institutions. If you think we've done the right thing by bailing out those companies, I wonder if you've noticed that we haven't improved things any by the measures we've taken so far.

[ImissBush]

remediate??
does tht mean fix
:-)

[outnow]

What if a company is widly successful because it is crooked and gets away with its crimes for many years. Then the CEO and other officers loot the company, load it up with debt, and move their accounts offshore? So much for free market karma.

The real world doesn't work like they say in textbooks written by conservative think tanks funded by the wealthiest bankers and oil barrons.

Effective regulation, transparency and full acoountability, including fraud and RICO lawsuits work just fine. The brain trust already figured this out almost a century ago.

[bratcat]

I'm no economic expert but I think there's some simple truths that we need to see on Wall street-

- Do whatever it takes to make no company "too big to fail".

- Increase transparency on bailout payouts and payment returns. How hard would it be to make a list of all companies being bailed out, the amout given, and the amout repaid?

- Only limit exec pay on bail out companies. If a business wants to pay their CEO 50x the average worker, fine, but if your company fails, don't come crying to the taxpayer for a bailout.

I'm surprised that a year into TARP we haven't seen much progress on these simple concepts.

[pakaal]

"If a business wants to pay their CEO 50x the average worker, fine"

Actually, the ratio is closer to 300:1 CEO to average worker.

http://www.aflcio.org/corporatewatch/paywatch/pay/

I challenge any CEO to prove they work 50 times harder than the average employee, let alone 300 times harder. Ask the Enron employees, Lehman, Goldman, Bear Sterns, whoever, if they felt their CEO had earned his or her pay.

[bratcat]

good info, thanks, and I agree. when 1% of the population has 95% of the wealth it's not "socialistic" to want to change the distribution; although I'm sure the great oracle- Joe the Plumber, would disagree.

[noesis]

GS is TBTR -- Too big to regulate. It's got to be chopped up, for the security of the nation.

[Elbrando]

Slice all these big banks into smaller pieces and be done with it. It worked for the phone company and it will work for them.

Better yet stop going to banks and go to credit unions instead.

[Cheshiremoe]

They need to be broken up so that there not "Too big to fail".

These companies need to be separated so that the risk is not shared across the whole financial system.

Capitalism/"Free Market" leads to companies trying to manipulate the system to get as close to a monopoly as possible to make as much money as possible... always moving toward a rigged market. That is why regulation and anti-trust laws are necessary.

Unfortunately a good portion of our population is brain washed (see tea party movement or healthcare reform protests).

Even as the multi-national companies are fined millions of billions of dollars they calculate that in to the cost of business and continue to game the system.

The fraud needs to stop... we need to return to a free market with oversight to keep the companies inline.

Some industry need a real free market and have never had one... Telecoms.

[noesis]

Essential reading:

The Untold Story of How the Fed Rescued the Insolvent American Banking System in the 1980s - and the Lessons for Today
http://www.washingtonsblog.com/2009/10/fed-economist-american-banks-went.html

[leduck]

too big to allow it to fail, does not mean it wont fail anyway....

[Clownbaby]

FDIC says this... after the banks got bailed out. Great work...after the fact and after YOU (the FDIC) benefited from not being exposed as the ponzi scheme that you are. Throw her and her bosses in jail with Bernie.

[djwfutbol]

This is all meaningless gibberish. What does "big" mean, what does "fail" mean? Is it really worthwhile to have a free-for-all where large companies go out of business willy-nilly, taking amassed wealth with them? I don't see how that can help.

I understand risk moderation, though, and I would suggest that monitoring and regulating risk is a worthwhile activity and could lead to a world where a big company might not find itself in the position of failing.

[outnow]

Comments after the article bring up the WaMu deal and JPM Special Products (derivatives) problem that the FDIC was involved in. This is a huge scandal. Read the comments to the article in the NTY.

[Alex5ive]

IF IT'S TOO BIG TO FAIL THEN IT'S TOO BIG TO EXIST!

[hark]

"Too Big To Fail" is not the right expression to describe what's happening. It should be "Too Big To Regulate" or "Too Big To Control."

Our government, or we the people, are in danger of losing our ability to control and regulate the corporate world, because it is becoming too big, too wealthy, and too powerful. One can easily imagine the day when government is squashed by the sheer size of this sprawling international collection of giant conglomerates. This system is supposed to serve human beings, not enslave them.

We face not only the takeover of our government from within, as corporate surrogates occupy all the key and elected positions, but from without, as corporate assets overwhelm government resources.

In other words, we're in danger of having our government stolen from us by the corporate world. And it's not a paranoid conspiracy, like the right wingers imagine. of a one world government. Ironically, it's free market capitalism, which we will find, much to our dismay, serves only the rich, that is taking us over.

We're afraid of the wrong villain.

I won't say it's going to happen, but we are on the way toward it.

[Clownbaby]

Explain to me what exactly is "free market" about bailing out the banks in the first place. This mess isn't a creation of "capitalism," but of corporatism: a marriage between corporations and gov't. The gov't was a co-conspirator in the biggest theft in modern history, and there should be perp walks to show for it.

[sonofsamphm1c]

"Too big to fail" is a horrifically bad description of why Bush and Paulson, both true believers in letting failed institution fail, changed their free-market spots for a rare bout of commonsense.

The institutions that were certain to fail if there was not a bailout were not too big to fail; they were too interconnected with healthy businesses and governments, and their failure would have set off a chain-reaction of failures that would have also taken down the healthy with them.

They were too interconnected to be allowed to fail. It cannot be changed. The earth is now a very small place.