Tuesday, January 7, 2014

Too Small To Bail Out

As Richard Fisher (President of the Federal Reserve Bank of Dallas) notes in this podcast, the ultimate problem is "scale and scope," which the recent "reforms" of the banking sector have not addressed.  He also argues that investment and similar banks could best be protected from bailouts (or rather, the taxpayer can best be protected from then) is explicit language that such banks will not be favored with such largesse (language that they would be required to display on whatever paperwork, etc. they display before the public).  Of course the problem with such a proposal (as Russ Roberts notes) is that it obviously isn't self-governing.  It depends on people honoring it.

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