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Yellen Asks the Right Question About Wells Fargo

Are some banks too big to manage?
The Fed just sent him a letter.

The Fed just sent him a letter.

Photographer: Saul Loeb/AFP/Getty Images
Corrected

In her final hours in charge at the Federal Reserve, Janet Yellen raised an issue central to the health of the U.S. financial system: Can banks grow too big and complex to manage? Wells Fargo, the case in point, certainly makes you wonder. And it isn't alone.

The world’s biggest financial institutions run myriad lines of business, with hundreds of thousands of employees spread across the globe. This involves two kinds of risk. One is the danger of losses so large that they burn through capital and upset the broader financial system. The other arises from failing to apply controls and standards aimed at curbing misbehavior and maintaining confidence.