Calling for a breakup of “too big to fail” firms, Federal Reserve Bank of Dallas president and chief executive Richard W. Fisher said such institutions significantly hamper the Fed’s ability to properly conduct monetary policy, according to the bank’s 2011 annual report.
While the Dodd-Frank Act seeks the end of TBTF, Fisher warned it may increase banking industry concentration, which would be dangerous.
The 10 largest U.S. banks hold 61% of banking industry assets, more than twice the 26% they held 20 years ago.
“It is imperative that we end TBTF,” Fisher wrote. “In my view, downsizing the behemoths over time into institutions that can be prudently managed and regulated across borders is the appropriate policy response.”