Elizabeth Warren, chairperson of the Congressional Oversight Panel on bank bailouts in an interview with Newsweek offers this commonsensical advice on financial institutions and markets:
There are a lot of ways to regulate "too big to fail" financial institutions: break them up, regulate them more closely, tax them more aggressively, insure them, and so on. And I'm totally in favor of increased regulatory scrutiny of these banks. But those are all regulatory tools. Regulations, over time, fail. I want to see Congress focus more on a credible system for liquidating the banks that are considered too big to fail. The little guys aren't immortal; they pay for their mistakes. The big guys can't be immortal either. A free market cannot operate in a too-big-to-fail world.Wind them down rather than prop them up? What is implied here is provisions for short-term nationalization, along Swedish lines. Given last year's off the books EFF policy, we should be paying attention to this too.
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