Destroy the large banks using creative destruction

Regulate, Don't Split Up, the Huge Banks - Steven Rattner, New York Times

 

If we remove the deposit insurance from the large banks, with warning and a reasonable upper limit to the total value of the bank and deposits, the banks themselves will conform to the new reality with no other government action. (they would need to understand they were not only “not too big to fail”, they are being encouraged to reorganize themselves into smaller pieces)

 

“Out of that disaster came significant improvements. Balance sheets and risk controls were strengthened. Regulatory scrutiny was beefed up. The Dodd-Frank overhaul of financial regulation became law in 2010. A shaken world exhaled.

But because of flaws in Dodd-Frank, the possibility of future catastrophic failures has not been eliminated, nor would it be by Mr. Weill’s proposal.”

So the current law is not sufficient.

 

“Most important, Congress buckled to vested interests and failed to revamp the dizzying and overlapping patchwork of an alphabet soup of agencies that regulate financial institutions. Just one minor agency was eliminated and a new, unwieldy oversight council was placed above the ungainly mess.”

Maybe reinstate the minor agency and remove the rest.

 

“Dodd-Frank did set out some sensible principles for dealing with systemically important banks that are endangered.”

Better, eliminate the systemically important banks.