Janet Yellen: We don't need to break up the banks CNNMoney CNNMoney

Janet Yellen: We don't need to break up the banks
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CNNMoney

I think that is correct  The size of the institution isn't the issue.  e.g. with the 2008 crisis, the key factor there was bundled subprime mortgages rated far higher than they deserved.  100 small banks all having too much invested in a type of instrument that goes under is just as problematic as 1 bank 100 times as large that made the same investments.  Who knows what form the next financial crisis will take.  But requiring banks to have higher safety margins (i.e. more capital) is good and will help.  I think I'd like to see some sort of finance laws that would
a) require the credit rating of all parties or components to be transparently carried along with any bundling of such instruments.  i.e. so even with the banks (and rating agencies) faulty rating of these subpime mortgages at least the credit rating of the borrower would be carried along.
b) maybe a pretty high flip tax, i.e. if you only hold something for less than a few days or weeks, you pay a extra fee as banks making loans that they knew they would unload virtually the day thye signed was also a big part of the problem.  They had no incentive to make sure those were good loans, they only wanted to fees they got for making the loan and the commissions etc for bundling it.
c) some sort of serious penalty for knowingly passing on a mis-rated investment, and all such penalties have to be computed as a % of bank revenue so it can really hurt.  Across the board of government penalties we have to get past the setup of the fine being so small that the company (in any industry) can easily just view it as a the cost of business and thus the regulation becomes moot.

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