Community | October 05, 2009 | 27 comments

‘Too big to fail’ must end for all, FDIC chief says

source: http://dealbook.blogs.nytimes.com/2009/10/05/too-big-to-fail-must-end-for-all-fdic-chief-says/

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WakeUpPeople
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.

“We need to end ‘too big to fail’ and this needs to be an overarching policy that applies to everyone,” Ms. Bair said.

Ms. Bair said she believed that bank holding companies with subsidiaries that are shut down by regulators also should be made to pay the price of failure by being subject to the same wind-down process.

“I believe that the new regime should apply to all bank holding companies that are more than just shells and their affiliates regardless or not whether they are considered to be systemic risks,” she said, adding that including only systemically important firms in the shut-down regime could reinforce the ‘too big to fail’ doctrine.

Financial firms subject to systemic risk shutdown authority should likely also be required to publish “living wills” — details on how an orderly wind-down would play out — on their websites to provide more clarity to shareholders and customers.
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27 comments // ‘Too big to fail’ must end for all, FDIC chief says

  • Admirable
  • carmalite
  • kennymotown
  • phillyphil
    • 0
      phillyphil  

    • for a second i thought she said "regime" when refering to the current administration? wow. wow. wow. then i realized that the other use of regime is for a plan/medication. in any case, either would be appropriate...

      i like "things that are too big, should be made to fail" instead.

      lets get back to localized power, cooperation and self advocacy. i say, regulate the hell outta the big economic guns so little companies that innovate and are transparent have a chance to lead us in a new direction and re-invigorate our communities. if we make getting big a pain and undesirable, we can rebuild this society with grounded local approaches. big should be less of a concern than having quality operations.....

    • 2 years ago
  • hunzedog
  • J_Jammer
  • Monicboom
    • 0
      Monicboom  

    • I agree, we do need to do away with the "too big to fail" doctrine. Let the people that big this sh*t up swim in their own sh*t. It's really unfair that the American people have to pay for "janitors" to clean this up for the moment.

      For the moment in time things slightly look like they are picking up, but we really need new rules and regulations or else we will end up in another "Great Recession" come in 1,2,5 or 10 years.

    • 2 years ago
  • telcod
    • 0
      telcod  

    • "Let them eat whiffs of grape shot." That's what Marie Antoinette actual said and we all should know what happened to her. We keep attempting to put a cork in the Titanic. Good luck with that. The "system" has become so vile and corrupt it will need a cleansing of Biblical proportions. To quote "John Connor" --- "if you can read (sic) this, you are the resistance"

    • 2 years ago
  • AndrewH13
    • 0
      AndrewH13  

    • If a business is run poorly and fails, then it should wind down and cease to exist, regardless of its size and financiers. Period.

    • 2 years ago
  • FishaHouse777
  • munzik
  • neosophia
  • morirjedi
    • 0
      morirjedi  

    • There is no such thing as too big to fail. Banks that have FDIC coverage would lose large corp. money. Individuals would be insured up to $250,000. So only fat cats with all of their funds specific banks would take the hit. So it is not about us the 95% it is about the 5% that control us.

    • 2 years ago
  • hunzedog
  • Allorno1
  • tommic
    • 0
      tommic  

    • A start, for a capitalist/socialist society to exist and thrive any company is expendable market forces would dictate so. The government would be responsible for education, healthcare defense and support of the infrasrtucure. That would be bliss.
      Now we have corporations subsidized by the taxpayer through direct susidies or grants that are never paid. What a government of and by the people we should have a direct say in management of a companiy under direct subsidy.
      It s better than we have right now.
      tommic

    • 2 years ago
  • JonRaymond
    • 0
      JonRaymond  

    • The way to end this is for people to stop using banks. No demand, no banks. Even just using them substantially less would do the trick.

    • 2 years ago
  • AndrewH13
  • jaystyx
    • 0
      jaystyx  
    • JonRaymond:

      I would say re-establish the Glass Steagall act. Using savings banks is not the problem. It’s only when the government allowed savings institutions to engage in investing activities that we started seeing these kinds of problems.

      Banks that invest more aggressively (Shitty Bank and Skank of America) may face a liquidity crisis when they overvalue assets they hold on their balance sheet. Savings institutions used to adhere to strict regulations about what kind of activities they engaged in and what they were allowed to add to their balance sheet.

      Credit unions are still safe to use. You may want to be careful about how much you put into big banks and the financial services they offer.

    • 2 years ago
  • WakeUpPeople
    • 0
      WakeUpPeople  

    • "Too big to fail" = "Rules of Capitalism do not apply"

      If Fannie and Freddie went belly up, other providers would purchase their assets, and the circle of life would go on. "Too big to fail" means "too entrenched in govt to fail".

    • 2 years ago
  • Ihatethemall
  • kennymotown
  • nursediesel
  • nursediesel
    • 0
      nursediesel  

    • You mean after the Congress' "HUGE bail out for failure scheme" someone doesn't want to continue rewarding failure?
      Hope it's not too little, too late????

    • 2 years ago
  • neocongo
    • 0
      neocongo  

    • While I can't imagine hedge funds or insurance groups would fall under the jurisdiction of the FDIC, she is absolutely correct that "too big to fail" means "too big not to be regulated."

    • 2 years ago
  • Progresshiv
  • AndrewH13
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