Banks, of course, make their structures so complex that they cannot easily be broken up.
Simon Johnson explains five reasons why even Goldman Sachs's report supports breaking up the big banks. Under the new financial norms created after 2008, no one seems to question the enormous amount of debt that banks carry which in turn raises the risk of failure and certainly the banks no longer question the efficacy of the FDIC using their "Orderly Liquidation Authority" to resolve insolvent banks.
O, Brave New World!
Goldman's Big Guns Fire Dud in Defense of Megabanks
By Simon Johnson - Bloomberg View
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Fifth, on supposed progress to eliminate too big to fail, Goldman’s arguments fall under the heading of what Winston Churchill called terminological inexactitude. The Orderly Liquidation Authority under the Dodd-Frank financial reform law won’t work for complex cross-border banks, such as Goldman, because there is no cross-border resolution authority. Living wills have so far proved to be a joke, and annual stress tests show every sign of becoming a meaningless ritual that undermines serious supervision.
What will move forward the debate? Will it be another money-laundering scandal, another disaster in the European financial system, or further revelations about the London Whale and Libor?
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