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Boston University professor Con Hurley's plan would require systemically important firms to set aside reserves equal to the net advantage funding and otherwise they get for being big.
July 24
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Lower borrowing costs for the biggest institutions based on perceived government support encourage these institutions to grow larger and more systemically important. This dynamic also puts community banks at a competitive disadvantage.
As the article pointed out, a number of studies have concluded that the value of the "Too Big to Fail Subsidy" is staggering.
If the forthcoming Government Accountability Office study validates these findings, the results will underscore the sense in accounting for the subsidy.
In the meantime, legislators and regulators should give serious consideration to integrating Professor Hurley's plan into the emerging regulatory patchwork aimed at ending Too Big to Fail.
Robert Tammero is an attorney in Boston.
