Skip to comments.Too Big to Fail?
Posted on 05/01/2014 7:52:42 AM PDT by Academiadotorg
At the Heritage Foundation, professors Charles Calomiris and Mark Flannery provided insights on the ramifications of the U.S. governments bank bailouts after the 2007 financial crisis. Calomiris is the Henry Kaufman Professor of Financial Institutions at Columbia Universitys Graduate School of Business and Flannery is the BankAmerica Eminent Scholar in Finance at the University of Florida.
The major issue with Dodd-Frank, said Calomiris, was how none of these problems were adequately fixed. Regarding the promise to liquidate and not bail banks out, Calomiris said, Unfortunately, and I think now theres a clear consensus across the board in terms of economists of all political tastes or affiliations, is that Article Two of Dodd-Frank institutionalized the bailouts of Too Big to Fail banks rather than avoiding them.
How so? He said that the law created a political path of least resistance to politicians to bail out banks [and] it even funds it through a special new tax. The FDIC, or the Federal Depository Insurance Commission, said it will not enact a tax to fund the bank bailouts, yet Calomiris said, that is not very credible.
Flannery identified two different types of Too Big to Fail banks: those with explicit government support and those with the governments implicit support. As a result, this contingent support ensures that taxpayers are on the hook for these bank bailouts. A large problem with big banks are how their loss absorbing capacity varies from bank to bank, which means that each bank has a level of being able to absorb debt and survive in the banking industry.
They’re bigger than ever. And we’ve added “Too Big To Jail” to the lexicon as well.
“Too Big To Fail” means break ‘em up.
Dodd-Frank, as does most CommieDemocrat legislation, accomplishes quite the opposite of what they claimed it would when selling it. Not only does the law NOT effectively address “too-big-to-fail” and concentration of banking assets, it piles on a vast number of high compliance-cost regulations and creates the anti-bank Consumer Finance Protection Board. Such heavy regulatory burdens hit smaller community banks the hardest because they do not have the resources to effectively deal with the regulations. Most of these regulations have served to reduce credit availability to the public, raise their costs to borrow and maintain bank relationships, and piled ever increasing compliance costs on banks, which of course are passed along to the customer. The ultimate result has been very strong pressure for community banks to sell out (get out while the getting is good), quite the opposite to ending too-big-to-fail and financial asset concentration. These are NOT unintended consequense; they damned-well knew what they were doing when they did it.
And Dodd-Frank is NOT the only source of regulatory proliferation on banks. Much has been done with the government strong-arming the accounting industry, as well as application of international Basel Capital standards on community banks to a far more extensive degree than regulators advertised way back in the 1990s. In short, I believe there is a full blown conspiracy to drive most community banks out of the business and further concentrate banks to a few. As usual, our government is conspiring to steal from its citizens, all the while claiming it is for the good of the citizens . . . evil thieving liars. . . .
Dodd Frank is the obamacare of the financial industry.
Screws it up so bad that uncle sugar will have to step in to fix the problems.
Imagine the ads for baraqabank.
Of course, they will be sharia compliant.
Dodd/Frank should be called the Goldman Sachs Bill. In the end they made out like bandits.