One more report decrying the scale and potential for mischief of our large banks might pass unnoticed except for its source: the Federal Reserve System, the oversight wing of large banks.
When the regulatory center of capitalism blows the whistle on the actual center of capitalism that’s big news. In the lead essay of a new report from the Federal Reserve Bank of Dallas Harvey Rosenblum, the head of the Dallas Fed’s research department concludes, “As a nation, we face a distinct choice. We can perpetuate TBTF (Too Big To Fail), with its inequities and dangers, or we can end it. Eliminating TBTF won’t be easy, but the vitality of our capitalist system and the long-term prosperity it produces hang in the balance.”
At the end of 2010, according to Simon Johnson our six largest banks had assets valued at over 63 percent of GDP, up from 55 percent before the crisis (and just 17 percent in 1995). The Dallas report pointedly subtitled, Why We Must End Too Big to Fail—Now notes that the big banks are “difficult to control because they have the lawyers and the money to resist the pressures of federal regulation.” Which leads the lead agency regulating big banks to propose the “ultimate solution for TBTF—breaking up the nation’s biggest banks into smaller units.”
