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.
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Break up the banks, says Minneapolis Fed chief
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.
