Break up big banks, Dallas Federal Reserve chief says
NATIONAL HARBOR, Md. — The largest banks are “practitioners of crony capitalism,” need to be broken up to ensure they are no longer considered too big to fail, and continue to threaten financial stability, a top Federal Reserve official said on Saturday.
Richard Fisher, head of the Fed's Dallas branch, has been a critic of Wall Street's disproportionate influence since the financial crisis.
He took his message to a small audience in a secondary ballroom at the Conservative Political Action Conference in National Harbor.
Fisher said the existence of banks viewed as likely to receive government bailouts if they fail gives them an unfair advantage, hurting economic competitiveness.
“These institutions operate under a privileged status that exacts an unfair tax upon the American people,” he said.
“They represent not only a threat to financial stability but to fair and open competition (and) are the practitioners of crony capitalism and not the agents of democratic capitalism that makes our country great,” said Fisher, who has been a vocal opponent of the Fed's unconventional monetary stimulus policies.
Fisher's vision pits him directly against Fed Chairman Ben Bernanke, who recently argued during congressional testimony that regulators had made significant progress in addressing the problem of too big to fail. Bernanke asserted that market expectations that large financial institutions would be rescued is wrong.
The biggest banks were under scrutiny on Friday during a Senate hearing on JPMorgan Chase & Co., which hid trading losses, according to a report by the Senate's Permanent Subcommittee on Investigations.
The New York-based firm under CEO Jamie Dimon lost more than $6.2 billion last year in a credit derivatives bet by Bruno Iksil, known as the London Whale.
Fisher said his proposal “will not lead to the denial of credit for U.S. corporations.”
The cost from big banks “far exceeds the benefits,” and the United States does not need “to have the largest banks in the world to compete,” Fisher said after his speech.
“The point is to have healthy banks,” he said. “The point is that the taxpayer is not subjected again to the kind of losses or economic disruptions that they face from having concentrated institutions.”