Seven Reasons the Debate Over ‘Too Big To Fail’ Is Here to Stay

From American Banker
By Victoria Finkle
April 1, 2013

WASHINGTON — The debate over whether large banks are still “too big to fail” has spread like wildfire in recent months.

But much like an actual wildfire, the conditions had to be just right for the discussion to travel quite so widely and carry so much heat. Below are seven reasons that “too big to fail” has gained renewed focus recently — and why it isn’t going away anytime soon.

Doubts on Dodd-Frank

While the Dodd-Frank law was designed to address “too big to fail,” many critics see it as a missed opportunity because it did not take broader action.

“Maybe Dodd-Frank, for all of its good things and bad things, didn’t go to the heart of the problem — didn’t achieve structural reform,” said Cornelius Hurley, director of the Boston University Center for Finance, Law & Policy. “And so now we have people asking questions that they should have asked in the beginning. What does it mean to be too big to fail, what kind of subsidy do you get?”

Hurley added that current concern over the issue is “the cumulative effect of the wound never healed in the first place.” Whenever another Libor settlement or anti-money-laundering violation is announced, for example, “there’s a little more salt in the wound,” he said.

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