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A Credible Path for Ending Too Big to Fail

A Credible Path for Ending Too Big to Fail Abstract The high degree of concentration in the U.S. financial system has been intensified in the wake of the 2007–09 financial crisis. Implicit government support of banks that are deemed “too big to fail” has resulted in excessive risk taking and a focus on short-term rewards rather than long-term performance. This paper proposes a three-step plan to limit the federal safety net to commercial depository institutions and to restructure institutions so that no one institution poses systemic risk in the event of failure and that the largest banks face the same kind of risks of closure and market risk as the smallest. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Business Economics Springer Journals

A Credible Path for Ending Too Big to Fail

Business Economics , Volume 48 (3): 7 – Jul 1, 2013

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Publisher
Springer Journals
Copyright
2013 National Association for Business Economics
ISSN
0007-666X
eISSN
1554-432X
DOI
10.1057/be.2013.14
Publisher site
See Article on Publisher Site

Abstract

Abstract The high degree of concentration in the U.S. financial system has been intensified in the wake of the 2007–09 financial crisis. Implicit government support of banks that are deemed “too big to fail” has resulted in excessive risk taking and a focus on short-term rewards rather than long-term performance. This paper proposes a three-step plan to limit the federal safety net to commercial depository institutions and to restructure institutions so that no one institution poses systemic risk in the event of failure and that the largest banks face the same kind of risks of closure and market risk as the smallest.

Journal

Business EconomicsSpringer Journals

Published: Jul 1, 2013

References