Federal Reserve Bank of Dallas President Richard Fisher urged that large U.S. banks be split apart because a highly concentrated financial system is hindering economic expansion.
The “institutions that amplified and prolonged the recent financial crisis remain a hindrance to full economic recovery and to the very ideal of American capitalism,” Fisher said in an essay in the Dallas Fed’s 2011 annual report posted online. “Downsizing the behemoths over time into institutions that can be prudently managed and regulated across borders is the appropriate policy response.”
Fisher said the Dodd-Frank Act, passed in part to end bailouts, has led to a “dangerous trend” of greater banking concentration. He also reiterated that “the lackluster nature of the recovery” is due to uncertainty around U.S. fiscal and regulatory policies.
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