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The New "Too Big to Fail" Proposal--Skeel

The Obama adminstation's new financial reform proposals, like the version proposed several months ago, would give regulators the power to step in and take control of large nonbank financial institutions, as the FDIC already does with commercial banks.  As folks who have stumbled on this blog in the past  will know (and are no doubt tired of hearing about), I think this is a serious mistake.  This magazine article describes the concerns in a bit more detail, and offers what I think would be a better approach.  I'd be very interested in reactions.

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Comments ( 2 )

David -I stumbled on your article while skimming thru the new Weekly Standard and skipping over the multitude of anti-Obama pieces (even tho I agree w/ them, I just can't read one more). Your take is like elevated commonsense parenting; I especially appreciate the clarity of your writing and explanations - a lost art.

Bailouts of this size increase the supply of money in the U.S., enhance the liquidity of systemic banks, improve the availability of business credit, and decrease the risk of deflation - which would be catastrophic according to several recent opinions published in the Economist.