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Dallas Federal Reserve Bank President Richard Fisher on how to break up large banks without increasing regulations.
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Sort of devil's in the details and the question is how -- you've actually said I'm quoting you now.
I don't believe it's the role of the Central Bank to bail out and I use this term very advisedly fiscal malfeasance that implies that that has happened.
In the past.
How does how do you prevent the Central Bank from doing efforts mall where is it happened was was the the TARP program a bailout of of fiscal malfeasance.
Well -- talk about fiscal policy which is taxing and spending.
And we know that's -- -- in Washington on both sides the I'll.
We -- bigger bigger deficits we have unfunded liabilities and there's the regulatory side.
Again we elect people to write our laws you mention Dodd-Frank that's senator Dodd congressman frank.
And was passed by the United States congress.
That's the regulatory side and what we're dealing with here is.
Regulation not fiscal policy percent fiscal policy -- match you know that and what I was referring to there is that is not the job of the Central Bank.
To do their work.
Writing tax laws and controlling spending so that business have confidence.
To take the monetary accommodation we provided as the Central Bank we print a lot of money money is cheap.
We got gasoline in the tank someone -- -- -- people step on the accelerator.
Move the automobile jobs and prosperity for job creation prosperity forward.
That is dependent significantly on what your cost factors -- gonna be if you're running businesses the woman or man is trying to build something.
Needs to know what how to going to be taxed is -- a positive tax or negative tax.
Kind of spending is gonna take place and they also need to know.
What kind of regulatory environment -- -- health they're gonna cost always kind of things that's of mess in Washington right now man that's a separate issue David -- how we regulate the banks.
Or these behemoth too big to fail institutions.
And our point is very simply.
That we think the only way to effectively deal with this -- to make sure they're not too big to fail how do you do that will never again go -- -- this specific broader than devil's in the details here and and you don't already have a massive government involvement in the in the fiscal affairs a country.
How to yet to break up the banks without increasing the regulations.
Well simplicity is always a virtue we do have.
Financial system oversight committee and stability oversight committee.
That committee can very clearly state.
And it's up to them to decide were banks and institutions put us at risk.
Again I do believe the private sector would probably the best applicator of those assets.
I'd rather have instead of a giant behemoth bank -- I'd rather have five to twelve or whatever the numbers smaller banks that used to be that a giant behemoth bank -- smaller institutions.
Who can compete.
-- and openly competitive marketplace not being subsidized in -- the cost of funds.
And certainly again and this is the objective of the exercise.
Making sure American taxpayers are not ever again put on the -- For bad judgments or the inability to manage the scope and scale of these gigantic and -- what role would that central and yes I understand what role would the Central Bank have in stopping the -- -- -- station.
Of some of these big banks.
Well again they they they get this -- is -- in part because of their size and -- cost of funding is much lower.
So we are members the chairman -- -- -- is a member of the financial stability oversight.
Committee or council was known as have -- We also write rules and regulations because our.
Our regulatory franchise was expanded under Dodd-Frank which we appreciate.
So it's a question of effectiveness of -- and by the way the Fed is hard at work.
-- governor Ventrilo to try to find a new capital standards how much capital these banks have to have in their pocket.
To make sure they don't put themselves into jeopardy again are we gonna see -- desire.
We are seeing changes there and he's.
Real people on this issue -- he's working very hard on -- and the staff under destruction but.
The question is will this do the trick.
And our point is from the Dallas Fed's perspective.
My our best guess is that in the end the most effective solution.
Is to basically make sure these institutions are downsized so -- places and house's position again all right let.
