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Too Big To Fail Alive and Well

Steve Pearlstein has a terrific, must read column in today's Washington Post brilliantly entitled "Too Big to Prevail."  If you care about financial stability and preventing more needless taxpayer bailouts of Wall Street and the financial industry, then you have to read his column. 

I'll quote just a few of the highlights: 

"...Capital One, along with the rest of the banking industry, is proposing criteria for assessing risks to the financial system so narrowly that they wind up never stopping any financial institution from doing anything. By trying to come up with purely objective, numeric criteria for determining what size is 'too big' or what businesses are 'too risky,' regulators fall into a trap in which any acquisition or activity can made to appear too insignificant to trigger a global financial crisis.

"Remember Fed chairmen Alan Greenspan and Ben Bernanke assuring everyone that subprime mortgage lending was just too small to cause a financial crisis? That is precisely the kind of reasoning that develops when regulators take the narrow, numeric view."

"And while it is true that there is a big difference between the systemic risks posed by a trillion-dollar bank and a $300 billion bank, that kind of logic falls into the category of two wrongs somehow making a right. We know that Greenspan and fellow regulators should never have permitted mergers that created trillion-dollar banks. Given the recent crisis, using that as the standard is loony."

Now, go read the entire column; think about the implications and then take action.  Participate in the public comment process.  Join organizations who care about these things and are working to prevent the next crisis.  Speak out.  Get others to join you.  

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