“The disagreeable but sound thing to dofor firms regarded as ‘too big to fail’ would be to dismantle them over time into institutions that can be prudently managed and regulated across borders,” Fisher said in a speech at the CFR in New York.
(Bloomberg) — Federal Reserve Bank of Dallas President Richard Fisher called for an international pact to break up banks whose collapse would threaten the financial system, a position that goes beyond other Fed officials.
“The disagreeable but sound thing to do” for firms regarded as “too big to fail” would be to “dismantle them over time into institutions that can be prudently managed and regulated across borders,” Fisher said in a speech at the Council on Foreign Relations in New York.
The Obama administration has proposed limiting banks’ proprietary trading, while Fed Chairman Ben S. Bernanke is among officials who have called for a law to wind down failing financial firms. Such a move may still confer a “government- sponsored advantage” on the companies, Fisher said.
“Given the danger these institutions pose to spreading debilitating viruses throughout the financial world, my preference is for a more prophylactic approach: an international accord to break up these institutions into ones of more manageable size,” said Fisher, 60. “If we have to do this unilaterally, we should.”
Fisher, a former fund manager and deputy trade representative who often speaks on international issues, said his views “may be slightly radical.” The Dallas Fed president doesn’t play a direct role in talks on financial regulation. The main officials involved in international talks involving major central banks are typically the Fed’s chairman and vice chairman and the president of the New York Fed.