Financial system reform must address not only the systemic risks, but also the too-big-to-fail dilemma, Federal Reserve Board governor Daniel K. Tarullo said.

“The regulatory system accommodated the growth of capital market alternatives to traditional financing by relaxing many restrictions on the type and geographic scope of bank activities, and virtually all restrictions on affiliations between banks and non-bank financial firms,” Tarullo said in a speech before the Exchequer Club in  Washington, D.C., yesterday, according to prepared text released by the Fed.

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