Monday, January 3, 2011

Obama and the 111th Congress' biggest failure...

That something needs to be done is pretty clear. Wall Street veteran Henry Kaufman made the case (registration required) the other day in the Financial Times. The Dodd-Frank Act did nothing about the extraordinary concentration of assets that had taken place, he noted. The ten biggest institutions share of assets grew from 10 percent in 1990 to well over 70 percent today. Future failures could only increase that concentration, just as they did last fall.  Where else to put the assets of a failed bank but in the hands of the other giants? Small banks will be squeezed further in the years ahead, competition will decrease, volatility and risk-taking will increase, wrote Kaufman, until in the end there will be no choice but to recreate a system with a large number of smaller institutions no longer deemed too-large-to-fail.

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