President of Dallas Fed, Richard Fisher Says Too-Big-To-Fail Banks Need To Be Broken Up

Fisher Too Big To Fail

 By Pedro Nicolaci da Costa
Reuters, March 16, 2013

NATIONAL HARBOR, Md., March 16 (Reuters) – The largest U.S.  banks are “practitioners of crony capitalism,” need to be broken  up to ensure they are no longer considered too big to fail, and  continue to threaten financial stability, a top Federal Reserve  official said on Saturday.

Richard Fisher, president of the Dallas Fed, has been a  critic of Wall Street’s disproportionate influence since the  financial crisis. But he was now taking his message to an  unusual audience for a central banker: a high-profile Republican  political action committee.

Fisher said the existence of banks that are seen as likely  to receive government bailouts if they fail gives them an unfair  advantage, hurting economic competitiveness.

“These institutions operate under a privileged status that  exacts an unfair tax upon the American people,” he said on the  last day of the annual Conservative Political Action Conference  (CPAC).

“They represent not only a threat to financial stability but  to fair and open competition (and) are the practitioners of  crony capitalism and not the agents of democratic capitalism  that makes our country great,” said Fisher, who has also been a  vocal opponent of the Fed’s unconventional monetary stimulus  policies.

Fisher’s vision pits him directly against Fed Chairman Ben  Bernanke, who recently argued during congressional testimony  that regulators had made significant progress in addressing the  problem of too big to fail. Bernanke asserted that market  expectations that large financial institutions would be rescued  is wrong.

But Fisher said mega banks still have a significant funding  advantage over its competitors, as well as other advantages. To  address this problem, he called for a rolling back of deposit  insurance so that it would extend only to deposits of commercial  banks, not the investment arms of bank holding companies.

“At the Dallas Fed, we believe that whatever the precise  subsidy number is, it exists, it is significant, and it allows  the biggest banking organizations, along with their many nonbank  subsidiaries – investment firms, securities lenders, finance  companies – to grow larger and riskier,” he said.

Fisher argued Dodd-Frank financial reforms were overly  complex and therefore counterproductive.
“Regulators cannot enforce rules that are not easily  understood,” he said.

(Reporting by Pedro Nicolaci da Costa; editing by Gunna  Dickson)

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