An article in the Wall Street Journal from Neel Kashkari, president of the Federal Reserve Bank of Minneapolis and a member of the Federal Open Market Committee.
Kashkari says 'too big too fail' is 'alive and well', citing four European bank failures (& 3 taxpayer bailouts) in recent weeks:
- On June 1, the Italian government and European Union agreed to bail out Banca Monte dei Paschi di Siena with a €6.6 billion infusion, while protecting some bondholders who should have taken losses. Then on June 24, Italy decided to use public funds to protect bondholders of two more banks, Banca Popolare di Vicenza and Veneto Banca, with up to €17 billion of capital and guarantees. The one recent case in which taxpayers were spared was in Spain, when Banco Popular failed on June 6.
He says:
- Large banks need to be able to withstand losses of around 20% ... But they have only about half that amount in equity ... There is bipartisan support for fixing the problem, but it will require forcing large banks to raise much more equity.
Link to the fuylla rticle is here, may be gated: New Bailouts Prove 'Too Big to Fail' Is Alive and Well
