Time to Kill Bailed Out Banks?
Posted at 8:45 a.m. on Feb. 26
The Federal Reserve Bank of St. Louis spoke with economist William Emmons about the complexity and risks of the largest banks, which included an interesting and rarely discussed proposal: “a strictly enforced ‘death penalty’ regime” for bailed out banks.
“Emmons also offered…a law mandating that any bank requiring government assistance would be nationalized, with a plan to sell it back to new shareholders at some point in the future… Emmons noted that TARP (the Troubled Asset Relief Program) was a half-step in this direction, in which the federal government took noncontrolling equity positions in megabanks—preferred instead of common equity—and didn’t wipe out shareholders or management.”
