HFSC Hensarling speaks on America’s “too big to fail” problem

220px-Jeb_HensarlingJeb Hensarling, the chairman of the House Financial Services Committee, spoke on America’s “too big to fail” problem on Wednesday, saying if “we lose our ability to fail in America…we may just lose our ability to succeed.”

“One of the most important steps we can take in ending Too Big to Fail institutions is to remove the permanent, taxpayer backed, government guarantee of Fannie and Freddie,” Hensarling said. “Regrettably, Dodd-Frank not only fails to end Too Big to Fail and its attendant taxpayer bailouts – it actually codifies them into law. Title I, Section 113 allows the federal government to actually designate Too Big to Fail firms – also known as SIFIs. In turn, Title II, Section 210, notwithstanding its expost funding language, clearly creates a taxpayer funded bailout system that the CBO estimates will cost taxpayers over $20 billion.”

Hensarling said that TBTF designations are “bad policy and worse economics,” adding that the designations risk further bailouts and become “self-fulfilling [prophecies].”

“Bailouts beget bailouts, and the most fundamental question is this:  If we lose our ability to fail in America, then one day, we may just lose our ability to succeed,” Hensarling said. “That is what this debate should really be about.”

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