A new member of the US Federal Reserve, Neel Kashkari, has recently echoed a warning saying that the U.S. economy is being 'threatened' by big banks because they "are still too big to fail."
He recommended for these huge banks to be broken up since they pose a 'significant' threat to the U.S. economy.
Kashkari was instrumental in the financial bailout of some of the biggest banks in the country in 2008. He was recently appointed to the office of President of the Federal Reserve Bank in Minneapolis.
In a speech given at the Bookings Institution in Washington D.C. Kashkari laid down his view about the current status and outlook of the TBTF (too big to fail) banks.
"The Federal Reserve Bank of Minneapolis is launching a major initiative to develop an actionable plan to end TBTF, and we will deliver our plan to the public by the end of the year," said Kashkari.
"Ultimately Congress must decide whether such a transformational restructuring of our financial system is justified in order to mitigate the ongoing risks posed by large banks," he continued.
Kashkari added that although these huge and influential banks were not the only reason for the financial crisis and the Great Recession that the country is experiencing, there is no doubt that their role as a fulcrum in the financial system contributed considerably to the enormity of the crisis, as well as the wide-ranging damage it exacted throughout the economy.
To be able to achieve this goal of ending the TBTF banks, the newest member of the US Federal Reserve recommended for the "breaking up (of) large banks into smaller, less connected, less important entities."
He also stated that these big banks should be transformed "into public utilities by forcing them to hold so much capital that they virtually can't fail." This is much like the regulation for nuclear power plants.
