Too Big to Fail List a Secret
October 30th, 2009Via: Reuters:
U.S. regulators on Thursday scoffed at the administration’s plan to not publicly identify financial firms the government considers “systemic,” saying such a list cannot remain under wraps for long and federal laws could mandate disclosure.
“It’s likely that most, if not all, of the institutions so identified would eventually be known to the public,” said Federal Reserve Governor Daniel Tarullo, to the House Financial Services Committee during a hearing on systemic risk.
“While there is a reason to try to avoid an increase in moral hazard, we should probably be realistic here about what will and won’t be known.”
The Obama administration, in draft legislation released on Tuesday, proposed that there be no public list, the thinking being that listed firms could be perceived as too big to fail.
U.S. Treasury Secretary Timothy Geithner even acknowledged that the public will know who these firms are, but said the government act of publishing such a list could send the wrong message.
“What you don’t want to do is, by identifying a list of companies that are going to be held to tougher standards, create an expectation the government will step in and protect them if they screw up,” he said at the same hearing.
