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Former Treasury Department general counsel Peter Wallison says that there is reason to fear a breakup of the big banks, and that most people haven’t...
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Focus more on the possibility.
Of a congressional votes on breaking up large banks joining me now is co director of -- value program on financial policy studies.
-- Wallace and Peter thanks for joining us.
To be here don't like the -- -- of breaking up the big banks why is that.
Well I don't know that I don't like the idea I do think that it has not been fully considered even though many well known people.
One of them at the stand in another at head of the Dallas stand.
Have been advocating.
Breaking up to -- banks I don't think we've given that enough consideration.
These very large banks are quite important too large corporations especially when they are operating internationally.
And if we -- to break them up.
We would make it very difficult I think for those corporations to function.
Well the critics who argued though that because they're so big and because of the perhaps.
Inferred to back -- of the government that they have been able to borrow at lower costs.
And therefore -- -- getting more of a market share at the expense of the medium size and smaller banks.
I don't disagree with that at all I think it's probably true we really should have some.
Thorough study of that issue but I think there's a lot out there which indicates that is true however.
If we are just talking about there having some financial benefits.
-- because they're too big to fail we can extract those benefits you can tax away those benefits you can increase.
There.
-- insurance premiums for deposit insurance.
You can increase their capital their lots of things you can do to reduce a financial benefit.
The real underlying reason I think that people are.
Seeking to.
Break up these banks.
Is that they fear that these banks are too big to fail in this sense that they will bring down the economy if they fail.
That's a completely different issue and one that I think is serious and one that should be considered.
But I don't think that in the end those banks if one or two of them failed would have that effect.
Talking of affects what about Dodd-Frank Nicholson we have Basel III of these old intended to put more constrained some banks amount of capital they have to put aside.
-- strict rules.
All -- you could -- backlash that.
All but particular approach to be that these banks stopped to streamline they stopped to let go of employees that mean do the to the benefits outweigh the costs.
Well it's very hard to say but the banks are highly competitive with one another.
And if the banks are put in a position where they have to increase their costs.
They will not be earning as much as they would need to turn in order to get the capital.
That they are told they have to increase.
So one of the ways that banks.
Increase their capital.
If they can't sell shares when they can't sell -- -- -- a price that is sensible to them.
Is to stop lending or at least reduce their lending and I don't think we want that to happen in this economy right now would not be good policy to do that.
And quickly theaters insisting there's some bipartisan support for a bill out there that would.
You know -- tackle this particular issue with the big banks do you think that there's a child's that we could see.
The actual breaking up of these large financial institutions.
Well I'd say there's a chance I do think he won't happen but there are quite a few people in congress.
Who are that.
Willing to consider this and one of the reasons for that.
Is that they do not want to look as though they are supporting the big banks so I think it's the kind of thing where people.
Would prefer not to think of something quite as drastic as this.
But politically.
They feel driven to it so I'm worried about a from that point of view we ought to have a lot more studied this issue before we consider.
Very kid Peter Wallace and thank you so much for joining us we appreciate it.
Pleasure thank you.
-- news alert according.
