Thomas Hoenig, President Federal Reserve of Kansas City, in an extraordinary speech says the big banks must be broken up and essentially implies the system itself is broken and corrupt. While this is something any reader of this blog probably agrees with, having it come from a Fed president indicates a palace revolt is brewing.
There are many villains in the story of the recent crisis and much written to name them, describe them and even curse them. If you want to know how it happened, read “Thirteen Bankers” and “All the Devils Are Here.” If you want to know how to fix the problem, I highly recommend “Regulating Wall Street,” from New York University’s Stern School of Business. If you want to understand why the American public refuses to ignore the injustices associated with executive compensation in bailed out companies versus budget cuts borne by the middle class, read Rolling Stone’s article “Why isn’t Wall Street in Jail?” If you wonder why “no one saw it coming” then I suggest you read up on Brooksley Born or, a decade later, Meredith Whitney.
Today, I am convinced that the existence of too big to fail financial institutions poses the greatest risk to the U.S. economy. The incentives for risk-taking have not changed post-crisis and the regulatory factors that helped create the crisis remain in place. We must make the largest institutions more manageable, more competitive, and more accountable. We must break up the largest banks
We need to take back the country from the criminals who are stealing it from us.