MacroScope

Bernanke on Sen. Warren and too big to fail banks: ‘I agree with her 100 percent’

I asked Fed Chairman Ben Bernanke during his quarterly press conference this week if the central bank had its own estimate for the implicit subsidy that banks considered too big to fail receive in the form of cheaper borrowing. Senator Elizabeth Warren had confronted him at a recent hearing with a Bloomberg estimate of $83 billion which itself was derived from an IMF study. At the time, he dismissed her concern: “That’s one study Senator, you don’t know if that’s an accurate number.”

At the press briefing, Bernanke said the Fed does not have its own figures for Wall Street’s too-big-to-fail subsidy, in part because there were too many factors that made it difficult to calculate.

However, this time around, he seemed more sympathetic to Warren’s concerns than he had at the Senate Banking Committee hearing.

I certainly never meant to say to Senator Warren – and I share her concern about too big to fail, I think it’s a major issue – I never meant to imply that the problem was solved and gone. It is not solved and gone; it’s still here, but there’s a lot of work in train.

We’re putting in the Basel capital standards. We’re putting in the orderly liquidation authority from Dodd-Frank. We’re working with our international partners. And I hope that we’ll make progress against too big to fail, because I agree with her 100 percent that it’s a real problem and needs to be addressed if at all possible.

from The Great Debate UK:

It’s all over: The banks have won

Laurence Copeland- Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. -

There is so much talk of a new regulatory framework for the financial sector, anyone would think it was an important issue.

Unfortunately, it is almost irrelevant, for the simple reason that, however sophisticated the new regime, experience shows it will be bypassed and/or captured by banks of one kind or another, possibly by novel types of institution invented specially for the purpose.