THE BURNED OVER DISTRICT

It is one thing for us DFH to call for breaking up the the Too Big To Manage banks but when the head of a Federal Reserve Bank calls for it, that is news. And when the head is one of the more conservative Fed bankers that is reaching to Fark.

In its annual report for 2011, issued on Wednesday, the Federal Reserve Bank of Dallas released a startling report revealing that 52 percent of all the assets held by the entire banking industry have now become aggregated into the hands of just five companies, and the top 10 institutions have swollen so large that they possess wealth that equates to roughly half of America’s annual gross domestic product (GDP).

It is for those reasons that Dallas Fed president Richard Fisher, who’s otherwise known as a conservative budget hawk, has embraced the radical cause of breaking up the nation’s largest banks and forever ending “too big to fail.” In a letter introducing the 2011 report, he cautions that Congress may not have gone far enough with prior attempts at financial reforms, and that those bills may even be working against the struggling economic recovery underway...

he argues, the risk of a “too big to fail” institution collapsing, which gave lawmakers the impetus for unprecedented financial bailouts in 2008, obstructs capitalism itself. Instead, Fisher writes, the banking industry must diversify — meaning lawmakers need to break out the hammer and chisel. He even warns that “megabanks” have become so powerful that they threaten the Fed’s ability to conduct monetary policy.

“Perhaps the most damaging effect of propagating [too big to fail] is the erosion of faith in American capitalism,” he adds. “Diverse groups ranging from the Occupy Wall Street movement to the Tea Party argue that government-assisted bailouts of reckless financial institutions are sociologically and politically offensive. From an economic perspective, these bailouts are certainly harmful to the efficient workings of the market.”

A copy of the report in PDF is here.
click pic to big