According to former key architect of Walls Street's 2008 bailout, Neel Kashkari, US banks are still "too big too fail". In a recent speech in Washington, he called for the break-up of these institutions and imposing a tax leverage to reduce systematic risks. If what Kashkari says is true, how will policymakers be able to avoid a wide chain reaction if one or more institutions struggles in the near term? The Minneapolis Fed is working on a new proposal to handle the possible return of "too big too fail". With elections coming up this issue will for sure be on the table.
Mr Kashkari said that the largest financial institutions “continue to pose a significant, ongoing risk to our economy”. He unveiled a task force at the Minneapolis Fed designed to examine ways to make the financial system safer. “Now is the right time for Congress to consider going further than Dodd-Frank with bold, transformational solutions to solve this problem once and for all,” Mr Kashkari said.