Kansas City Fed president Thomas Hoenig gave a blunt assessment of the post-Dodd-Frank banking landscape yesterday:
(Reuters) – Big banks like Bank of America Corp and Citigroup Inc should be reclassified as government-sponsored entities and have their activities restricted, a senior Fed official said on Tuesday.
The 2008 bank bailouts at the height of the financial crisis and other implicit guarantees effectively make the largest U.S. banks government-guaranteed enterprises, like mortgage finance companies Fannie Mae and Freddie Mac, said Kansas City Fed President Thomas Hoenig.
“That’s what they are,” Hoenig said at the National Association of Attorneys General 2011 conference.
“You’re a public utility, for crying out loud,” he said.
So Hoenig is saying that the bailouts — TARP — created a major market distortion, leading to a situation in which bailout recipients are now primed to create another financial crisis. Something else to consider next time the Obama administration claims that TARP was a success because it’s cost less than expected.
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