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Break Up the Mega-Banks, Says Bailout Architect; Public Citizen Agrees

Feb. 16, 2016

Break Up the Mega-Banks, Says Bailout Architect; Public Citizen Agrees

Statement of Bartlett Naylor, Public Citizen’s Financial Policy Advocate

Note: Minneapolis Federal Reserve Bank President Neel Kashkari said in a speech today that he would convene a series of public roundtables to explore options for avoiding a bailout in the wake of another large bank failure, including breaking up large banks. As a U.S. Treasury Department official under President George W. Bush, Kashkari drafted the memorandum that called for a $700 billion bailout of the banking system, known as the Troubled Asset Relief Program (TARP).

Public Citizen welcomes the candid assessment from one of the chief architects of the 2008 Wall Street bailout that too-big-to-fail banks persist. Public Citizen also applauds his call for solutions that include breaking up the largest banks.

It is especially revealing that a Republican Federal Reserve bank president has acknowledged the continued threat of bank failures. When more conservatives say we’re still vulnerable to bank failures, perhaps more members of Congress will recognize that we do, indeed, have a problem, Houston.

Public Citizen also commends the Minneapolis Fed for proposing public roundtables to generate alternative ideas for reform. Too often, ideas for Wall Street reform emerge from closed-door meetings or from Wall Street itself. Consequently, it’s not clear where factual considerations have given way to compromises.

President of the Federal Reserve Bank of Kansas City Thomas Hoenig, president of the Federal Reserve Bank of New York William C. Dudley and former president of the Federal Reserve Bank of Dallas Richard Fisher have all said the same thing: To avoid another crisis, regulators should break up banks that pose a systemic threat. Leaders in Washington should listen to the growing chorus of experts calling for fundamental reform of our financial system and an end to the era of mega-banks.