Wednesday, February 27, 2013

Bernanke to End Too Big To Fail!

Federal Reserve Chairman Ben S. Bernanke said he wants to end investor perceptions that the largest U.S. financial institutions will be given taxpayer bailouts to prevent a collapse.

Well, he at least wants to end investor “perceptions” about bailouts.  Not necessarily end the bailouts, just the perception of the bailouts.

“As somebody who’s spent a lot of late nights trying to deal with these problems and the crisis, I would very much like to have the confidence that we could close down a large institution without causing damage to the rest of the economy.”

I guess he wants to have the “confidence” that he “could” close down a large institution.  He isn’t saying he would, just that he could…and be confident about it.

[Senator Elizabeth] Warren cited a Bloomberg View article estimating that the largest U.S. banks receive an implicit taxpayer subsidy amounting to $83 billion a year because their funding costs are lowered by the perception they won’t be allowed to fail.

“I think we should get rid of it,” Bernanke said.

But to get rid of it would require getting rid of central banking.  What gives, Ben?

“Over time you’ll see increasing market expectations that these institutions can fail,” [Bernanke] said.

Forget “market expectations,” what about market reality?

“The benefits of being large are going to decline over time, which means some banks are going to voluntarily begin to reduce their size.”

Fat chance.  The Fed exists to protect these large banks.

End the subsidies.  End the Fed.

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