Clear and Present Danger: Why We Must Break Up the Too Big To Fail Banks Now – Dallas Fed

What makes the attached essay on the US banking system so striking is not so much what is being said,  since others have said it before, but rather, who is saying unequivocally that the status quo in the US banking system presents 'a clear and present danger' to the national economy.

"More than three years after a crippling financial crisis, the American economy still struggles. Growth sputters. Job creation lags. Unemployment remains high. Housing prices languish. Stock markets gyrate. Headlines bring reports of a shrinking middle class and news about governments stumbling toward bankruptcy, at home and abroad.

Ordinary Americans have every right to feel anxious, uncertain and angry. They have every right to wonder what happened to an economy that once delivered steady progress.

They have every right to question whether policymakers know the way back to normalcy. American workers and taxpayers want a broad-based recovery that restores confidence. Equally important, they seek assurance that the causes of the financial crisis have been dealt with, so a similar breakdown won’t impede the flow of economic activity.

The road back to prosperity will require reform of the financial sector. In particular, a new roadmap must find ways around the potential hazards posed by the financial institutions that the government not all that long ago deemed “too big to fail”—or TBTF, for short.

In 2010, Congress enacted a sweeping, new regulatory framework that attempts
to address TBTF. While commendable in some ways, the new law may not prevent the biggest financial institutions from taking excessive risk or growing ever bigger.

TBTF institutions were at the center of the financial crisis and the sluggish recovery that followed. If allowed to remain unchecked, these entities will continue posing a clear and present danger to the U.S. economy.

As a nation, we face a distinct choice. We can perpetuate TBTF, with its inequities and dangers, or we can end it. Eliminating TBTF won’t be easy, but the vitality of our capitalist system and the long-term prosperity it produces hang in the balance.

Harvey Rosenblum, Choosing the Road to Prosperity: Why We Must End Too Big To Fail – Now, Dallas Federal Reserve Bank

Harvey Rosenblum is the Dallas Fed’s executive vice president and director of research.

Read the rest here.

The perpetuation of the status quo is favored by the monied interests on Wall Street and the very powerful New York Fed which has always been their house bank.

It is also supported by the politicians and advisors of both parties who have become addicted to taking Wall Street money, both as campaign contributions, as well as highly paid sinecures and consulting fees when they leave office. 

The Banks must be restrained, and the financial system reformed, with balance between individuals and the corporations restored to the economy, before there can be any sustained recovery.