Regulatory Disputes Over Restricting the Size of Our Biggest Financial Institutions

Today's Bloomberg news story by Craig Torres and Alison Vekshin, "Bair, Bernanke Want Tougher Curbs on Biggest Banks," highlights the differences of regulatory opinion over future restrictions on the largest financial institutions.  FDIC Chairman Sheila Bair and Federal Reserve Chairman Ben Bernanke want to impose strict measures to curb the size and risk-taking of the nation's biggest financial firms, including more fees on the biggest bank holding companies for activities outside of traditional lending -- for example, proprietary trading. 

Bair says she favors "financial disincentives for size and complexity."  Bernanke says that "restricting size is a 'legitimate' option."  Treasury Secretary Timothy Geithner disagrees.  He would tax financial firms only after they have to be bailed out, expressing concern that pre-funded bailouts would create inappropriate expectations.  The Obama plan would allow financial institutions to expand if they meet higher capital and liquidity requirements.

Link to Story:  http://www.bloomberg.com/apps/news?pid=20601087&sid=aB4OVrCHNQmE

(ag) July 15, 2009, in Capital, Economy, Financial Regulatory Reform