Dallas Fed Proposes Ending "Too Big To Fail", Urges Removal of Failed CEOs, Breakup of Banks

Richard Fisher, governor of Dallas Fed wants to end "Too Big To Fail" and Urges Removal of CEOs of Bailed-Out Banks

The Federal Reserve Bank of Dallas said taxpayer aid to failing banks should come only after the voiding of all employment and bonus contracts and the removal of chief executive officers and boards of directors.

�A set of harsh, non-negotiable consequences� for requesting U.S. Treasury assistance might also include �clawbacks� to gain cash and stock bonuses paid the top management team during the prior two years, the Dallas Fed said today in a slide presentation on its website.

The proposal reflects Dallas Fed President Richard Fisher�s view that large U.S. banks need to be split apart because they operate with an implied government safety net that puts their risks of failure on taxpayers.

End Too Big to Fail Now

Please consider the Dallas Fed Slideshow Why We Must End Too Big to Fail � Now

Concentration Intensifies the Impact of Mistakes

�Human weakness will cause occasional market disruptions. Big banks backed by government turn these manageable episodes into catastrophes.�

Close But Not Quite Correct

I have one major  disagreement with the proposal. Fisher said "taxpayer aid to failing banks should come only after the voiding of all employment and bonus contracts ..."

I say taxpayer aid to banks should never happen. Banks and bondholders should take the hit.

However, it is refreshing to see this kind of talk. It would be a major step in the right direction. Unfortunately, Bernanke is against it.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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