Banks that grow so large that they risk throwing the financial system in disarray should they need government aid should pay a fee for being too big to fail, says John Thain, former chief executive officer at Merrill Lynch.
“There’s no question in my mind that at least the top five financial institutions today are in fact too big to fail,” he says.
“You could actually charge them, and the bigger they are, the more complicated they are, the more you charge them,” Thain tells Bloomberg.
Lawmakers are examining ways to overhaul the banking system in wake of the financial crisis that has cost taxpayers billions in bailout money.
Senators John McCain of Arizona and Maria Cantwell of Washington say they want to bring back sections of the 1933 Glass-Steagall Act, which separated commercial and investment banking.
“‘Too big to fail’ is one of the biggest issues that we haven’t really figured out what to do with yet,” Thain says.
While a fee for systemic risk may be a good idea, a new tax is “not necessarily the right way” to tackle the problem, Thain adds.
The country's so-called Too Big to Fail banks are getting ready to pay big bonuses to their executives, much to the chagrin of taxpayers.
“This big-bonus season of course is going to offend the American people. It offends me,” says Christina Romer, chair of the president's Council of Economic Advisors, according to the AFP.
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