Too Big To Fail Has Become a Permanent Bailout Program

[Draggingtree]

Forbes:

Op/Ed

| By Peter Wallison & Cornelius Hurley

 

8/14/2012 @ 4:29PM |1.890 views

 

Too Big To Fail Has Become a Permanent Bailout Program

 

Congressman Paul Ryan’s selection as Mitt Romney’s running mate is being described as a “game changer” that shifts the presidential election from negative tit-for-tat swipes to a higher strategic plane. What better time than now to have the long overdue discussion about the central issue of the Financial Crisis–what to do about banks and other financial firms considered too-big-to-fail. That discussion need not be rancorous or partisan once all sides recognize that these firms are being bailed out every day.

The Dodd-Frank Act compounds the problem by declaring that every banking organization larger than $50 billion is “systemically important.” This is pure fiction, but it signals that these banks — simply because of their size — are more likely than others to be rescued if they are in danger of failing. The same will apply to nonbanks like insurance companies, finance companies, hedge funds, and money-market funds if they are designated as “systemically important financial institutions” by the Financial Stability Oversight Council.

We’ve seen this movie before, where private companies use public backing to reduce their borrowing costs. It was called “Fannie Mae and Freddie Mac Take the Taxpayers for a Ride.” Then, read more

http://www.forbes.com/sites/realspin/2012/08/14/too-big-to-fail-has-become-a-permanent-bailout-program/