Housing-News-Report-April-2016

April 2016 H OUSING N EWS R EPORT

revolution against capitalism, but it does take for granted that thesystemwecurrentlyhave inplace isunsustainable — and must be transformed.” Clearly, big banks need stiffer regulation and higher capital requirements to neutralize the harm their failure could inflict on the overall economy. Dodd-Frank failure to reign in the too-big-to-fail banks virtually guarantees

In “Break Up the Banks!” he suggests carving up big banks into three differently named and unaffiliated entities: “a lightly regulated investment-bankpartnership, a wholesale corporate bank, and a retail bank that takes insured deposits.” Investment banks, he argues, could then take as much risk as they want and pay their employees bonuses as high as they want.

that someone will reform it. The question is whether it will be the judicial or legislative branch. Dodd-Frank’s flaws are becoming impossible to ignore. Deep cracks are appearing in the foundations of the Dodd-Frank law enacted in 2010. Regulators admit that the Dodd- Frank law hasn’t worked and judges are questioning its abuses. The issue of breaking up the banks is an important topic at an important moment in

In chapter four, he provides 10 remedies to break up the big banks. Some of the recommendations include: simplify the rules, scrape Basel II and III, put a cap on absolute size and reduce interconnectedness among banks. Earlier this year, Neel Kashkari, president of the Minneapolis Federal Reserve, suggested ending the still too-big-to-fail banks, arguing the biggest banks need to be broken up into smaller entities.

David Shirreff

the “recovery” of the global financial system.

“What I’ve proposed in this book is a revolution in favor of the more efficient use of capital — in favor of fairer distribution of the real costs and benefits of financial services,” he writes in the closing paragraph. “It is not a

“Break Up the Banks” is a slim volume, with only 111 pages, but its simple idea of breaking up the big banks packs a serous punch.

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