Daily News: October 15, 2012

Fed Should Push to Cut Biggest Banks Down to Size


In an article, Bloomberg noted that during a recent speech, Daniel Tarullo, a governor of the Fed, spoke about potentially imposing a size cap on the largest banks.

The Bloomberg writer, Simon Johnson, a professor at the MIT’s Sloan School of Management, points out that Tarullo is suggesting that creditors to very large financial institutions believe they receive downside protection from the government. This gives large bank holding companies and other financial enterprises the ability and incentive to become even larger, which in turn increases the perceived subsidy and further lowers their funding costs.

To read the Bloomberg story, click here.