On February 16, 2016, in a speech at the Brookings Institution in Washington, DC, Federal Reserve Bank of Minneapolis President Neel Kashkari argued that banks are still too big to fail and remain a significant, ongoing risk to the US economy. Kashkari noted that the Dodd-Frank Act did not go far enough and that regulators should consider breaking up large banks into smaller entities, turning them into public utilities by forcing them to hold higher levels of capital (as high as 25% of total assets), and taxing leverage throughout the financial system. According to Kashkari, the Minneapolis Fed will launch an initiative to consider transformational options through policy symposiums and policy briefs and create an actionable plan to end too big to fail that will be released by year-end for consideration by legislators, policymakers, and the public.
Kashkari’s predecessor at the Minneapolis Fed, Narayana Kocherlakota, responded to Kashkari’s proposals, noting that such measures, particularly imposing higher capital standards, would have “adverse macroeconomic consequences.”
Kashkari’s speech is available at https://www.minneapolisfed.org/news-and-events/presidents-speeches/lessons-from-the-crisisending-too-big-to-fail.
Kocherlakota’s response is available at: https://sites.google.com/site/kocherlakota009/home/policy/thoughts-on-policy/2-16-16.