Federal Reserve Bank of Dallas President Richard Fisher reiterated his view that the nation’s largest banks may eventually need to be broken up to prevent them from posing threats to stability and economic growth.
“I trust regulators will rise to the challenges posed by the financial crisis,” Fisher, 62, said Monday in the text of a speech in New York. If they don’t, “we will ultimately have to take more Draconian measures.”
Fisher echoed concerns among Fed district bank presidents, including Thomas Hoenig of Kansas City and James Bullard of St. Louis, that the financial-overhaul law enacted last year may not be strong enough to solve the too-big-to-fail problem and to prevent a meltdown by one or more big banks from damaging the economy. The Dallas Fed bank chief didn’t comment about the future path of monetary policy.
“If after the myriad rules and regulations are written and implemented we have not eradicated too big to fail from our financial infrastructure, reform will have failed yet again,” he said in the speech at the Market News International Seminar. One option is to “simply break up the largest banking organizations” to eliminate the risks they might pose.
The legislation, named after Massachusetts Representative Barney Frank and former Connecticut Senator Christopher Dodd, was enacted in July in response to a credit crisis that has resulted in $2.02 trillion in writedowns and credit losses at financial firms globally. The law establishes an oversight council charged with detecting threats to the financial system, and gives the Fed new oversight of nonbank financial companies.
Fisher, who votes on the Federal Open Market Committee this year, dissented five times in favor of tighter policy the last time he was a voting member in 2008.
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