Posts Tagged ‘banking’

Knights Who Say…

February 26, 2009

Alas, it seems President Obama has not caught up with me, Bernanke, Yglesias, Paulson, Spitzer, Klein, Volcker, and Simon Johnson:

financial institutions that pose serious risks, systemic risks, to our market should be subject to serious oversight by the government. And here’s why. When the Federal Reserve steps in as a lender of last resort, which it’s had to do repeatedly since this financial crisis began, it’s providing an insurance policy underwritten by the American taxpayer. And taxpayers should be assured that the Fed thoroughly understands the institutions that it is effectively insuring and actively monitoring them to make sure that they’re not taking risks that will cost taxpayers in the long term.

He’s got the right reasons, but fetches up at the wrong policy — or, better said, an incomplete policy.  Banks clearly do need to be better regulated.  But banks (and other institutions) also need to be prevented from getting so big that they “pose serious risks, systemic risks, to our market.”  Obama’s emphasis seems to still be on the “to fail” part of too big to fail, when it needs to be on the “too big” part.