Fed Gov. Powell: Too Big to Fail Reforms on Right Track
Much of the regulatory reform effort since the financial crisis has been aimed at ending the practice of rescuing large financial institutions with public funds, or ending "too big to fail," but it is too early to judge success or failure of the efforts, Federal Reserve Governor Jerome Powell said in a recent speech at the Institute of International Bankers Washington Conference.
"The too-big-to-fail reform project is massive in scope. In my view, it holds real promise," Powell said. "But the project will take years to complete. Success is not assured." He added that he believes the efforts by U.S. and global regulators to fight too big to fail are by and large on the right track and should be allowed to proceed before resorting to more drastic measures such as breaking up the largest banks.
Still, the governor added, more intrusive reforms may ultimately be necessary. At the least, it is important to debate them and understand those alternatives in case the current reform project fails, Powell noted.
Drawing on lessons of the early 1990s
Risk has grown with time
"My own view is that the framework of current reforms is promising, and should be given time to work," the Fed governor said. "In any case, too big to fail must end, even if more intrusive measures prove necessary in the end."
March 28, 2013