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Rob Cox writing in the Breakingviews.com section of the NYT...
~~~~ " .... All of Mr. Bernanke’s ideas make sense. But the most effective way to minimize the chance that institutions are too big to fail would be, well, to make them less big — and more to the point, less interconnected.
Regulatory carrots and sticks would help. One approach would be to further increase the cost of deposit insurance for banks that engage in practices deemed risky.
Another would be to raise capital requirements in such a way as to force riskier businesses — possibly even entire divisions like fixed income, currencies and commodities trading — into separate, ring-fenced subsidiaries that are highly capitalized, or perhaps even make it practical for the banks to hive them off altogether as hedge funds.
These, too, could fail. But with damage confined to a smaller entity with less aggressive borrowing and no recourse to investors’ deposits, the financial system would have less difficulty absorbing the shock... " ~~~~
Now this is an idea I could get behind... ring fencing >>> trading/market making... I guess this is really a reversal of the Gramm-Leach-Bliley Act's intent... I think 9 years of GLB is enough...
This is separating the "black boxes" from prudential banking operations... OK...
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