To Big To Exist

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Roubini: ‘Too Big To Fail’ Revisited (permalink)

November 6, 2009

Nouriel Roubini calls for drastic regulatory reforms of systemically important institutions:

I noted recently that the problem of banks being too big to fail is even bigger now than it was before the crisis: “Why don’t we go to a system where they’re not too big to fail to begin with? The true solution to the too-big-to-fail problem requires more radical choices. In addition to an insolvency regime, such institutions should be broken up, and unsecured creditors of insolvent institutions should have their claim automatically converted into equity. A separation of commercial banking and risky investment banking should also be considered. Thus, some variant of the Glass-Steagall Act should be reintroduced.”

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