|By Patrice Hill, The Washington Times|
As the nation's largest bank with a breathtaking
The complex and highly leveraged transactions on which
The wrong turn taken by
Regulators have begun investigations into the incident and are empowered under the 2010 financial-reform law to prohibit risky trading as well as limit the banks' leverage and acquisitions in the future, if they deem that to be justified, he said.
"The argument will be, some transactions are too complex for even the best bank management teams; therefore, we the regulators need to limit the size and complexity of the biggest banks," he said.
While that legislation is not likely to pass in the heavily divided
Liberal groups are calling for action by both
"When banks are so big they assume government will bail them out, their excesses can be catastrophes," said
Some conservatives have also advocated downsizing the big banks.
Regulators are on alert as a result of the incident. Investigations have been launched by the Fed, the
"This is an important event," former chief
"Significant errors will be made at almost all institutions at one time or another," he said. "In light of what has happened, one would tend to have a bias towards larger safety buffers, larger capital requirements, and larger levels of liquidity" at the biggest banks.
While regulators are planning more such restrictions on the big banks, others openly advocate downsizing them as the best way of ensuring they can't drag down the economy if they fail again. Besides
Some bank analysts say regulators and the press are overreacting to the incident.
"What's the fuss?" asked
The fact is, the federal government needs banks as big as
"The vast expansion of the U.S. money supply over the past three decades makes such financial alchemy necessary," he said. "The Fed keeps these zombies alive in order to preserve the Treasury's ability to issue debt. In that sense, nothing has changed in
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|Source:||McClatchy-Tribune Information Services|