Wednesday, July 25, 2012

Too Big to Fail

The problem is that if a bank thinks it is too big to be allowed to fail, it has an incentive to take on a lot of risk, confident that the government will have its back if it gets into trouble.

I'm interested in hearing your thoughts on financial institutions are are deemed too big to fail. On my page there is a link to the Minneapolis Fed. They have taken the lead on analyzing too big to fail.

Does Dodd-Frank do enough to curb too big to fail.

Here are some readings/videos:
Economist - The Dodd Frank act: Too big not to fail
NY Times - Telling Strength from Weakness
St. Louis Fed president wants them broken up.
Sheila Bair on TBTF

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