White House mulls ending TBTF policy

It's two decades too late, and its far from a done deal, but the days of Too-Big-To-Fail appear to be coming to an end.

(Reuters) - A council that includes the U.S. Treasury Secretary would help set policy for dealing with troubled financial firms under White House plans to deal with the "too big to fail" problem, CNBC television said on Monday citing sources.
The Obama administration would give the Federal Deposit Insurance Corp authority to unwind large firms whose failure could threaten the overall economy.

It's still only in the planning stages, and we've seen how lobbyists can block them, but its a start.

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I'm seeing a few signs of life, but of course press releases and even outright proposals don't mean anything if it's not strong legislation.

They also did something with executive pay, which needs our eyeballs.

But it does appear someone in there is hearing a few things.

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I agree. We have been hearing a different tone.

But where is the substance and desire to back the proposals. The Administration let derivatives and CFPA to be chopped up without a fight.

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TBTF Becomes Just Too Big

We don't have an actual written proposal yet. According to news report House Financial Services Committee may have something this week. But it seems that TBTF will become JTB - just too big. The proposals will not attempt to prevent or even break-up an existing TBTF.

Priliminary reports indicate that House proposal will force JTB institution to pay for its own liquidation. But the problem is that it's after the fact. So, greedy and risky behavior by JTB, who reap short-term benefits of bonuses, but to plunder the company and cause various potential systemic risk will not be deterred or prevented by the proposal.

There was talk of imposing or levying some sort of insurance premium but of course TBTF don't want that so it's not even considered by Barney Frank and the Obama Administration.

Simon Johnson was quoted in FT this morning as saying:

You should be paying in the good times - not right after the crisis.

That makes a lot of sense. But then again do we want to offend the financial oligarchy?

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