Mitt Romney said Wednesday that he believes a big bank should be allowed to fail if it runs into financial difficulty.
"My own view is that if a large bank gets in difficulty, why it can fail," he said in an interview with conservative blogger Ed Morrissey. "There's no reason why the shareholders or bondholders of a bank can't lose their funds if a bank were to get in trouble."
He went on, "What happened in 2008 was different on that, it was that mortgages held by virtually all of the banks were now in real trouble and it was the prospect of not just one or two banks failing, but all of the major banks failing and a complete collapse of our economic or our currency system."
The argument against letting a large bank fail is that the failure of one institution poses too much systemic risk to the financial system at large. After Lehman Brothers declared bankruptcy on Sept. 15, 2008, it led to the AIG bailout and threatened the stability of Merrill Lynch, Morgan Stanley, Goldman Sachs among other institutions. Ultimately, Congress had to pass the Troubled Asset Relief Program in an attempt to stabilize the financial system.
Romney also commented on JPMorgan Chase's recent $2 billion trading loss. "I would not rush to pass new legislation or new regulation," he said. "This is in the normal course of business a large loss but certainly not one which is crippling or threatening to the institution."
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