When I see my name in print included alongside names like Sheila Bair, Tom Hoenig, Richard Fisher, and Simon Johnson, I take notice.
In her recent American Banker opinion piece titled "
The very fact that terms like "too-big-to-fail" and "systemically important financial institutions," which is just a politically correct way to say systemically dangerous, are in the financial lexicon is proof enough that our financial system is badly out of balance and that a very small handful of banks are now beyond the ability of regulatory agencies to adequately and effectively impose regulatory discipline on them.
If regulatory agencies could effectively control these firms, then why are these terms still in use? Well, the facts tell the story. Since 2002 the six largest banks have been hit by at least 207 separate fines, sanctions or legal awards totaling $47.8 billion. None of these banks had fewer than 22 infractions each. One had 39 across seven countries. Just over the past two years, the top six banks have been cited 1,150 times by the Wall Street Journal and New York Times in articles about their improper activities. As one CNN opinion column headline put it "
So, again, with all due respect to Ms. Rehm's opinion piece, it is terribly naïve to think that any government will actually fail (in the classic sense) a bank that is, by definition, too big to fail. Because if they are too big to fail, they are too big to control (as recent history shows). This nation recognized that monopoly or oligarchies in commodities like oil or in sectors like communications was not good for free markets, and therefore our government moved to break up Standard Oil and AT&T. The result in both cases was that the parts became economically more valuable than the whole, and in both cases the free market and job creation flourished.
In recent years even Alan Greenspan has become an advocate of breaking up too-big-to-fail firms. In his own words, Greenspan said
So, I am honored to be counted among some of this nation's most brilliant financial policymakers and academics in calling for the true end of too-big-to-fail so that our free markets can really be free and robust.
Camden R. Fine is the president and CEO of the Independent Community Bankers of America.