Nouriel Roubini, Stephen Mihmn: A Radical Plan To Reform The Financial System - 'Bust Up The Banks'

07/10/2010 05:12 am ET | Updated May 25, 2011

Not only are such firms too big to fail, they're too big to exist, and too complex to be managed properly. They should be pushed to break themselves up. One way of doing this would be to impose higher "capital-adequacy ratios," which is a fancy way of saying that these institutions should be forced to hold enough capital relative to all the risks posed by their different units. This requirement would reduce leverage and, by extension, profits. The message: bigger isn't better.

For their part, the TBTF firms consider themselves essential to the world economy. Thanks to their scale, we're told, they offer "synergies" and "efficiencies" and other benefits. The global economy can't function without them, they say.