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Questo articolo è stato pubblicato il 30 luglio 2010 alle ore 09:13.
WASHINGTON, DC – The world economy faces a major problem: the largest banks in the United States remain too big to fail, meaning that if one or more of them were in serious trouble, they would be saved by government action – because the consequences of inaction are just too scary.
This problem is widely acknowledged, not just by officials but by bankers themselves. In fact, there is near unanimity that fixing it is a top policy priority. Even Jamie Dimon, the powerful head of the very large JP Morgan Chase, emphasizes that too big to fail must end.
Unfortunately, the Obama administration’s proposed approach to ending too big to fail – now taken up by the US Congress – will not work.
The current center of legislative attention is Senator Christopher Dodd’s financial reform bill, which has passed out of the Senate Banking Committee and will presumably soon be debated on the Senate floor. Dodd’s bill would create a resolution authority, meaning a government agency with the legal power to take over and close down failing financial institutions.
The bill’s proponents argue that this approach builds on the success of the Federal Deposit Insurance Corporation (FDIC), which has a long track record of closing down small- and medium-sized banks in the US with minimal disruption and no losses for depositors. In this context, resolution means that a bank’s managers are fired, shareholders are wiped out, and unsecured creditors can suffer losses. Essentially, this is a form of bankruptcy, but with more administrative discretion (and presumably more protection for depositors) than would be possible in a court-supervised process.
Applying this process to large banks and to financial institutions that are not formally banks – and that do not have insured retail deposits – sounds fine on paper. But in practice there is an insurmountable difficulty with this approach.
Think about the critical moment of decision – when a megabank, like JP Morgan Chase (with a balance sheet of roughly $2 trillion), may be on the brink of failure. You are a senior decision maker – perhaps the Secretary of the Treasury or a key adviser to the US president – for this is the level at which the plug must be pulled.
