Even Hank Paulson: The Too-Big-To-Fail Phenomenon Is “Unacceptable”

The Treasury Secretary at the start of the 2008 financial crisis – Hank Paulson – says:

5 yrs after the financial crisis, the Fannie Mae, Freddie Mac reform has made no progress and the market of shadow banks hasn’t been addressed, Paulson writes ….

Paulson calls the too-big-to-fail phenomenon “unacceptable” and proposes more stringent capital and liquidity requirements in order to minimize the advantages enjoyed by larger financial institutions ….

Paulson joins the following top economists and financial experts who believe that the failure to rein in the “too big to fail” banks is unacceptable:

  • Current Vice Chair and director of the Federal Deposit Insurance Corporation – and former 20-year President of the Federal Reserve Bank of Kansas City – Thomas Hoenig (and see this)
  • Former Federal Reserve Bank of New York economist and Salomon Brothers vice chairman, Henry Kaufman
  • Dean and professor of finance and economics at Columbia Business School, and chairman of the Council of Economic Advisers under President George W. Bush, R. Glenn Hubbard
  • Former chief economist for the International Monetary Fund, Simon Johnson (and see this)
  • The leading monetary economist and co-author with Milton Friedman of the leading treatise on the Great Depression, Anna Schwartz
  • Economics professor and senior regulator during the S & L crisis, William K. Black
  • Professor of entrepreneurship and finance at the Chicago Booth School of Business, Luigi Zingales
  • The Director of Research at the Federal Reserve Bank of Dallas, Harvey Rosenblum
  • Director, Max Planck Institute for Research on Collective Goods, Bonn, and Professor of Economics, University of Bonn, Martin Hellwig

And the head of the New York Federal Reserve Bank – and former Goldman Sachs chief economist – William Dudley says that we should not tolerate a financial system in which certain financial institutions are deemed to be too big to fail.

Federal Reserve Board governor Daniel Tarullo also backs a cap on the size of banks, and Former Treasury secretary under Reagan and George H.W. Bush, Nicolas Brady, says that we need to put a cap on leverage.

Top Bankers Call for Big Banks to Be Broken Up

While you might assume that bankers themselves don’t want the giant banks to be broken up, many are in fact calling for a break up, including:

  • Former managing director of Goldman Sachs – and head of the international analytics group at Bear Stearns in London- Nomi Prins
  • Numerous other bankers within the mega-banks (see this, for example)
  • Founder and chairman of Signature Bank, Scott Shay
  • Former Natwest and Schroders investment banker, Philip Augar
  • The President of the Independent Community Bankers of America, Camden Fine

Click here for background on why so many top bankers, economists, financial experts and politicians say that the big banks should be broken up.

Category: Really, really bad calls, Think Tank

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2 Responses to “Top Economists, Financial Experts and Bankers Say Giant Banks Are Hurting Economy”

  1. Herman Frank says:

    “Blah, blah, blah!”

    Reminds me of thousands of other demonstrators, petitioners, placard waiving do-goods. Truth is: “You’re all right and correct in your stand!”

    BUT the Kings of the financial industry NOW have the money AND are willing to spend it on lobbyists and influence buying to make sure the big stay big, to continue to receive this fantastic funding at 0% from the Fed, settling any and all claims for CENTS on the dollar, making their lobbyists submit more draft legislation which nobody reads until its too late AND they walk around as if they’re geniuses with a miraculous gift for making money.

    There’s not going to be tar and feathers for the Kings; they don’t care whether funding goes up to 3% – they’ll simple double their margin and add the margin on top of the 3%; they walk out of the courtrooms without having admitted to anything “they have simply economically settled” – “The House of Finance ALWAYS wins!”

    Until, finally, finally (!) someone realizes that they’re actually not dealing with “Uncle Albert from the bank down the street”. You’re dealing with a self-perpetuating fighting slash & burn machine with no mercy, no remorse, no conscience considering all these yelpers “SUCKERS”.

  2. victor says:

    Even if somehow the US big banks are “reined in” and broken up” there remain the biggest “big banks” by capital and market cap which are foreign: European, Japanese and Chinese (Gov. owned), see: