Dallas Fed: Break up the big banks
According to the Dallas Federal Reserve, one of the nation's most conservative regional banks, taxpayers will be on the hook for another giant Wall Street bailout, and the economy won鈥檛 be mended, unless the nation鈥檚 biggest banks are broken up.
The Wall Street sign is seen outside the New York Stock Exchange, in this file photo. According to Reich, the Dallas Fed has come out in support of breaking up some of Wall Street's biggest banks.
Chip East/Reuters/File
As the Supreme Court shows every sign of throwing out 鈥�Obamacare鈥� and leaving 30 million Americans without health insurance, another drama is being played out in the quiet corridors of the Federal Reserve system that may affect even more of us.
Taxpayers will be on the hook for another giant Wall Street bailout, and the economy won鈥檛 be mended, unless the nation鈥檚 biggest banks are broken up.
That鈥檚 not just me talking, or the Occupier movement, or that wayward executive who resigned from Goldman Sachs a few weeks ago. It鈥檚 the conclusion of the Dallas Federal Reserve, one of the most conservative of the Fed鈥檚 regional banks.
The lead essay in its just released annual says a cartel of giant banks continues to hobble the recovery and poses an ongoing danger to the economy.
Wall Street鈥檚 increasing power remains 鈥渄ifficult to control because they have the lawyers and the money to resist the pressures of federal regulation.鈥� The Dodd-Frank act that was supposed to control Wall Street 鈥渓eaves TBTF [too big to fail] entrenched.鈥�
The Dallas Fed goes on to argue that the Fed鈥檚 easy money policy can鈥檛 be much help to the U.S. economy as long as Wall Street is 鈥渟till clogged with toxic assets accumulated in the boom years.鈥�
So what鈥檚 the answer, according to the Dallas Fed? It鈥檚 鈥渂reaking up the nation鈥檚 biggest banks into smaller units.鈥�
Thud. That鈥檚 the sound the report hitting the desks of Wall Street executives. They and their Washington lobbyists are doing what they can to make sure this report is discredited and buried.聽
When I spoke with one of the Street鈥檚 major defenders in the Capitol this morning he snorted 鈥�Dallas represents small regional banks that are jealous of Wall Street.鈥� When I reminded him the Dallas Fed was about the most conservative of the regional banks and knew first-hand about the dangers of under-regulated banks 鈥� the Savings and Loan crisis ripped through Texas like nowhere else 鈥� he said 鈥淒allas doesn鈥檛 know its [backside] from a prairie gopher hole.鈥�
So as Republicans make the repeal of 鈥淥bamacare鈥� their primary objective (and Alito, Scalia, Thomas, Roberts, and perhaps Kennedy sharpen their knives) another drama is taking place at the Fed. The question is whether Bernanke and company in Washington will heed the warnings coming from its Dallas branch, and amplify the message.