Break up the banks?

In 13 Bankers Johnson and Kwak make a strong case for breaking up the biggest banks as the only way out of the doom loop in the financial sector. So far, among leading bank regulators, only Mervyn King, Governor of the Bank of England, has made this case strongly; see: http://www.guardian.co.uk/business/2010/feb/25/mervyn-king-urges-bank-breakup. Today, in the New York Times, Thomas M. Hoenig, President of the U. S. Federal Reserve Bank of Kansas City, makes the case as well, in a fine short essay entitled “Too Big to Succeed”: http://www.nytimes.com/2010/12/02/opinion/02hoenig.html?hpw. Don’t miss it.

This is what we all need to keep in mind about the ongoing global financial crisis: It’s not over yet, by a long shot, and we still cannot see the bottom of the downside risk – a true black-hole risk.

Book recommendation

In my Doom Loop I recommended strongly 13 Bankers by Simon Johnson and James Kwak, a book with an excellent historical perspective on the financial crisis, now approaching three years in duration, from which we cannot seem to extricate ourselves.  Simon Johnson also writes regular columns on the current episodes; don’t miss his latest piece, in the December 2, 2010 New York Times, entitled “How likely is default in Europe?”:  http://economix.blogs.nytimes.com/2010/12/02/how-likely-is-default-in-europe/