“Too Big” To Do Anything
A great article
in The Washington Post
by conservative writer George Will on the need to end “Too Big to Fail” (TBTF) treatment of our financial institutions and the need for serious financial reform. Basing his article on a new report
by the Federal Reserve Bank of Dallas, he states;
With the consolidation of the major banks after the 2008 financial crisis our economy is now more vulnerable to the recklessness that almost crashed the financial sector in 2008. Despite the Dodd-Frank
financial reform legislation the issue of TBTF has still not been addressed.
Capitalism — which is, as Milton Friedman tirelessly insisted, a profit and loss system — is subverted by TBTF, which socializes losses while leaving profits private. And which enhances the profits of those whose losses it socializes. TBTF is a double moral disaster: It creates moral hazard by encouraging risky behavior, and it delegitimizes capitalism by validating public cynicism about its risk-reward ratios.
Both presidential candidates need to adress how they will tackle this problem, and what their solutions to fixing it are.