Julie Stackhouse, the senior vice president of the St. Louis Federal Reserve, said on Thursday that she strongly opposed protecting America’s largest banks from collapse.
“The ability to fail is necessary to ensure market discipline,” Stackhouse said during a discussion sponsored by the St. Louis Fed and University of Missouri, according to St. Louis BizTalk.
Stackhouse said that 470 smaller institutions have collapsed since the recent financial crisis.
“They’re not too big to fail,” Stackhouse said, St. Louis BizTalk reports.
Stackhouse added that real risk is not readily identifiable today, adding that Dodd-Frank should be given time to serve its purpose.
“My own view is that we have to give it a change—not that it’s the best thing since sliced bread, but it’s the only tool we have, and it’s not going to change for now,” Stackhouse said, according to St. Louis BizTalk. “Will it work? We still don’t know that answer.”
Stackhouse also said that Glass-Steagall Act, which was enacted in response to the Great Depression, failed partly because of its many loopholes and that the loopholes in Dodd-Frank are not readily identifiable.
“It’s very, very, very, very complex,” Stackhouse said, St. Louis BizTalk reports.
More than 60 percent of the event’s attendees agreed with the idea that large Wall Street banks are necessary in order to compete internationally and provide credit to the largest U.S. firms.
Stackhouse said that JPMorgan Chase, America’s largest financial institution, is only the eighth largest bank in the world, according to St. Louis BizTalk.