FRB Dallas says no to 'Too Big To Fail'

Here's what the annual report of the Federal Reserve Bank of Dallas has to say about our inability to face up to the problems arising from the very idea of applying life-saving maneuvers to dying mega-banks:

"As a nation, we face a distinct choice. We can perpetuate TBTF, with its inequities and dangers, or we can end it. Eliminating TBTF won’t be easy, but the vitality of our capitalist system and the long-term prosperity it produces hang in the balance."

The report reminds us that it was people, not institutions, that were responsible for The Great Recession.  Another needed reminder: the mega-banks did fail, the government saved them.

The report doesn't simply list a catalogue of reasons for the failure.  It advocates higher capital requirements, but only for the behemoths. The authors seek a "financial system composed of more banks—numerous enough to ensure competition but none of them big enough to put the overall economy in jeopardy—(that) will give the United States a better chance of navigating through future financial potholes, restoring our nation’s faith in market capitalism" Such a system means breaking up the huge banks, most of which still are over-burdened with toxic assets.  And this is not something we should spend years debating. The time is now.