Fed's Fisher: "Too-Big-To-Fail Regulation Should Be Written By A Sixth-Grader"

Tyler Durden's picture

QE "is not a Buzz Lightyear policy," Dallas Fed's Fisher explains to Bloomberg TV's Stephanie Ruhle, "this will not go on forever." He admits there are limits to their (and implicitly the ECB or BoJ) policies - "we just have to figure out what they are." The always outspoken fed head goes on to explain why he believes the Fed's policy should be "dialed back... Not go from wild turkey, the liquor by the way, to cold turkey; but certainly slowing it down now." The too-big-to-fail banks are absolutely gaining from a substantial cost-of-funding advantage (over smaller banks) with their implicit government guarantee and Fisher expresses disappointment in the reams of pages that constitute new regulation adding that he would prefer "a simple statement saying they understand there is no government guarantee... It could be written by a sixth grader," as Dodd-Frank "needs repair." His fears are exacerbated by Cyprus as he notes, "[in Cyprus] you have an economy that is held hostage by bank failure and institutions that are too big to fail. We cannot let that happen in the U.S. ever again and the American people will not tolerate it."


Fisher on whether the BOJ's move puts the ECB or the Fed in a corner where they'll have to continue QE in order to stay on par:

The rates are already very low in Japan. I think people will want to wait and see how successful the program really is. Does it put pressure on us to continue? No, we have to conduct monetary policy according to what we feel is best to get our economy moving.


There has a consensus on the table to pursue along these lines of quantitative easing. I have voted and spoken against it. There is no QE infinity. I have never heard an argument at the table from anybody that we will take the Fed's balance sheet to $5 million or whatever number. We already have a very active program. The chairman spoke about this at his press conference. We have to judge the efficacy of what we're doing and either dial it back or dial it up a little bit. This will not go on forever and ever.


It is not a Buzz Lightyear policy. Neither we nor the ECB nor anyone else can follow that because there are limits and we just have to figure out what those limits are."

On whether he believes that QE, up until a certain point, was a success:

"I can only speak for myself, not my colleagues. I was in favor of the first tranche of mortgage-backed securities purchases. I am not in favor of continuing that process. I think we have to dial it back. Not go from wild turkey, the liquor by the way, to cold turkey. Certainly slowing it down now. I wasn't in favor of the second tranche. The housing market has come back significantly... We've seen a resurrection in that market and I think Fed policy was very helpful. I'm only giving my position. I think we need to dial that program back. That worked. And it is clearly working from the standpoint of driving up the stock market. It is not yet clear that this has been what has been regenerated, employment to robust degree that we would like to see. It has not happened yet. Corporations have clearly refinanced their balance sheets. Our businesses from a financial standpoint are lean and mean and ripped and strong. But they are not spending it on hiring people.


They are refinancing their debt, bolstering their balance sheets, making acquisitions, and it is too early to argue whether it has been successful or not, in my opinion. It has certainly helped the federal government, by the way. It has helped the federal government significantly.


We are buying so many treasuries now -- and I made this argument a long time before it was enormously unpopular. We have been monetizing the debt, and we continue to do so. At some point, we end up taking it all down. I'm not sure that incents the Congress deal what they have to deal with which is correct our fiscal imbalances. That is what I worry about the most."

On whether he believes that we are subsidizing too-big-to-fail banks right now:

"Absolutely. There is no question about it. There is some debate about what the size of the subsidy is. Bloomberg itself had a long report about being in the $80 billion range. There are numbers higher and less than that. It depends on how you calculate this. I can tell you one thing with certainty. There is a cost of funding advantage and it is substantial. It is unfair. We need to level the playing field. I'm not trying to bust these institutions up.


Our proposal at the Dallas Fed has been very simple: limit the taxpayer's liability to covering the deposit base, and making sure through that government guarantee, which is what we do in this country and only allowing the commercial banking operation of a large complex bank holding company to have access to the discount window.


The rest of their operations would be totally free standing that each counterparty to those operations, whatever the transaction may be, would sign a simple statement saying they understand there is no government guarantee. It would be agreed upon by both sides. We have drafted it up and shown it. It could be written by a sixth grader. It would make clear that no one would expect the government to step in for the risk taken in those areas…Yes, they currently being subsidized…It puts the smaller banking institutions at a competitive disadvantage and that is not the American way."

On why he believes that it's up to Congress, not regulators, to create new incentives so market discipline is restored to the banking industry:

"You are talking about Dodd-Frank, which does not work and in its preamble its outstated purpose was to stop too big to fail because congress makes the laws of the United States. They make the regulations that we as regulators have to follow. And right now, the Federal Reserve and others under the leadership of Dan Tarullo, one of our governors, is doing our absolute best to follow what is prescribed by Dodd-Frank. I'm not a critic of what we're doing. We're doing our very best to follow the law, but regulations have to be made and only Congress can make it."

On whether Dodd-Frank should just be scrapped entirely:

"I would not go that far, but I'd think it needs repair. We have advocated a small repair…All we are trying to do at the Dallas Fed is that we do not want to do this again. Cyprus is a great example, once again, as we saw in Iceland, of banks that jeopardize their entire country. We cannot let that happen. We can deal with this now that our financial institutions have been restored and the economy is moving forward. We're not a crisis situation like we were before. And to be fair to Dodd-Frank, it was forged in the crucible of a crisis."

On whether he's likening the situation in Cyprus to the situation that the U.S. could face if Dodd-Frank isn't repaired:

"No, I'm not. I'm saying that to solve a problem during a crisis is a lot harder than when you're on a level plane. That's where we are right now thanks to Fed policy and other actions that have been taken. We can deal with this now. There is bipartisan accord that too big to fail has not been solved. There is bipartisan agreement, and even the attorney general admitted he is afraid to prosecute these large institutions for whatever their misdeeds are because it might create economic damage. The problems are still there. Now that we are in economic recovery, we can deal with the problem. It is a different situation. The reason I mention Cyprus is because you have an economy that is held hostage by bank failure and institutions that are too big to fail. We cannot let that happen in the U.S. ever again and the American people will not tolerate it, so let's solve it."

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oldschool's picture

"The American people will not tolerate it."  What exactly is he smoking?

prains's picture

I'm a sixth grader and want nothing to do with this mess, airsoft all day..........

AlaricBalth's picture

If there is to be TBTF legislation it will be written by some of the 3000 (about 5 for each member of Congress) K Street lobbyists who work solely for the financial services sector. Between 2000 and 2012, $5.5 billion dollars has been spent by financial firms in Washington to ensure their interests. Anyone who thinks true reform is coming is delusional. The status quo will be maintained until, sooner rather than later, the whole financial sector implodes upon itself, taking the economy down with it. After that there will be nothing left to regulate.

knukles's picture

The lone voice of sanity inside Bernak's Bedlam


I'd love to see him with a Louisville Slugger and Krugman

smlbizman's picture

yeah but physics ceases to exist on his stove...because they are aging faster than us....i guess his grits cook faster too...

Zer0head's picture

QE "is not a Buzz Lightyear policy," Dallas Fed's Fisher explains to Bloomberg TV's Stephanie Ruhle, (who proceeded to eat him alive)

AlaricBalth's picture

"We’re not going to monetize the debt." Ben Bernanke during sworn testimony to Congress on 24 February 2010.

"We have been monetizing the debt, and we continue to do so." Richard Fisher, Dallas Fed President, 4 April 2013.

18 USC § 1001- Lying to Congress is a serious crime.

StychoKiller's picture

Eric Holder, our illustrious AG will get right on it!  (Bwahahahaha, I kill myself!)

Colonel Klink's picture

Nice My Cousin Vinnie reference!

Cabreado's picture

Sorry... that doesn't fly.

If the man had integrity, he would be yelling at the top of his lungs.

Do not forgive those in powerful places who choose to whisper about atrocities, and even then, only when asked.

bunnyswanson's picture

Posturing to buy time.  Speeches are just a stepping stone to the Cassandra Crossing, "we are working on it" and then deafening applause...over and over again...criteria places this as a means to justify the end (keep the masses quiet until it is too late).  Wealth seizure, stripped of your country and left to the mercy of a now very angry global community, awaiting their help. 

Oh yes,  so right you are. 

The lengths that they are going to in order to put a false facade on a coup is remarkable and only tells me that the day of point of no return, we will realize we are headed for the hell that leaves men to record it so that future men will never know this anguish.

espirit's picture

Agree, but think it's more of a "good cop / bad cop" play.

At the end of the day, they're buying time.

Arrowflinger's picture

No smoking necessary to see guillotines across the landscape.

Spigot's picture

Please do not tell me he said that. I can't bare to review the video. Can someone please tell me a nice big fat lie and say he was "mis-interpreted"?!

nmewn's picture

"He admits there are limits to their (and implicitly the ECB or BoJ) policies - "we just have to figure out what they are."


Awakened Sheeple's picture


We have no idea what the fuck we are doing, or how this will end.

agent default's picture

I think everyone has a pretty good idea how it will end.

centerline's picture

And, we really can't stop, so we are going to find out what happens anyhow.  So, buckle up.

Alexandre Stavisky's picture

I'd say anything and pretend to simpleness too if I had a no-conflict letter having made a mil' on insider info.  Geld und Sechs for sieben figures bitte.  Prolly made the deal while still in the meeting.  The chinese adore the 100 year egg, but they know nothing!  1913 to 2013.  That 100 year egg was superb.  No indictments, no rule of law, too big to fail, too systemic to prosecute.

So Goliath said, standing before a skinny youth known only for the lute and poetic prowess.  How can you stand against invincibility?

Then said the future king to the philistine, Thou comest to me with a sword, and with a spear, and with a shield: but I come to thee in the name of the LORD of hosts, the God of the armies of Israel, whom thou hast defied.

Too bad Golly did not remember to dig a grave prior to this contest.  His might, and terrible rage, and stature rotted on the plain that day.

Urban Redneck's picture

This is the way the world ends, Not with a bang but a whimper.

A Mandelbrot set is not some random image on a computer monitor, it is the result of a simple mathematical function

An image of global financial meltdown can be derived from various distinct functions

Common to all of them is TBTF, which the polticians continue to refuse to address

HeavyShadow's picture

guy is obviously suffering a massive brain haemorrhage while saying this...

Arrowflinger's picture

Based on BOJ, the figure now stands at $200 billion per month.

edb5s's picture

Well at least its a "known unknown," as opposed to an "unknown unknown."

Spigot's picture

Yeah, and these guys are what stands between us and absolute catastrophy? (sad head shaking)

Go Tribe's picture

It's like pelosi about obamacare. These people are just draining Americans of their money and sending it to their buddies. And then they come up with all these glib statements.

PUD's picture

Is he a banker?   check

Does he work for the fed?   check

Is a bankers mission statement to get as many as possible in as much debt as possible for as long as possible at as high a cost as possible?


Then fuck you fed fisher!  There is nothing you could possibly say that would be worth reading or listening to

ekm's picture

He's Henry Kissinger's business partner. He's the military complex guy.


That's why he votes no, because he's got backup.

fonzannoon's picture

ekm they declared Prudential and GE "systemically important" today. Insurance companies are becoming TBTF now. AIG as well. I think they realize it will be the insurers that go belly up and are preparing.

ekm's picture


Then who is not important?


How do you know this? Why did it not make the MSM?


fonzannoon's picture


Who is not important? My guess? Foreign insurers. Obviously the fed would not come in and bail them out. But there is a lot of US money in foreign insurers.

ekm's picture

I bookmarked the website.


However, I don't think that it matters much if the Fed declares something systemic or not, it's a political decision at the very end.

There must be some fine print at the bottom of that structure, however I am converging to what you've been saying from the very beginning: Insurance and Pensions they could be after.

We'll see. We learn as things develop

Urban Redneck's picture

Good thing BVI went full quota-monkey and literally destroyed its insurance industry as a result, otherwise an IRS sovereign shakedown (post-Cyprus) would have triggered their worst nightmare and bankrupted all their precious SIFIs in the process.

The nominal owner of the dollars is irrelevant,  what is critical is that those dollars remain "on deposit" and continue to support the ponzi scheme, and that the supply of contingent debt (demand for dollars) is never realized. 

skeeterpi's picture

Could someone at the Fed be sane?

TJ00's picture

In a parallel universe, yes.

Richard Head's picture

Fisher, you are mistaken, the American people will tolerate anything as long as their favorite TV shows continue running.

Bay of Pigs's picture

Americans apparently love it dry and hard and right in the ass.

Nobody is lifting a finger to do anything to stop these lying Bankster cocksuckers. For instance, where are the authorities like the SEC and FBI? Answer: Nowhere to be found.

koaj's picture

who is this Fisher guy? isnt Dancing with the Stars on?

dick cheneys ghost's picture

wall st got drunk.............

Phroneo's picture

He is absolutely wrong. The American people WILL tolerate it. They will lube themselves up, bend over and continue to vote  for the same parties that can only be trusted to stick it to us ever harder.

We love their abuse and they love our tears.

Everyman's picture

I don't think so.  People ar starting to see the disconnect, and Cyprus showed JUST WHAT thee TPTFs will do... STEAL YOUR MONEY!

We are at a tipping point.

schadenfreude's picture

Of course they do. That's what happened before and what is going to happen next time. Genie out of the bottle was with Gramm-Leachy-Biley Act. Now suck it up.

Vooter's picture

Agreed. The anger is becoming palpable...

kito's picture

tipping point, really??? the large, and ever growing, collectivist group of citizens, that comprise more than half of this nations population, who NEED the federal govt to get through the day, whether it be disability, govt employment, medicaid, medicare, food stamps, section 8,  etc dont see any tipping point........and they will not tolerate their "share" taken by individualistic rogues who dare take away what is theirs...............................

khakuda's picture

Dial it up and find the limits. In other words, we are going to keep dialing UP QE until something blows up. That will be our limit.

Reminds me of when I said please just let me put it in for a little while. I just want to push it to the limit and I swear I'll pull out before anything bad happens.

centerline's picture

I promise I will pull out.


(sorry about that one.  couldn't help myself.  I know, I am going to hell.  lol). 

Bay of Pigs's picture

And then "Whoop whoop....oh boy! Looks like we've got a runaway!"

pragmatic hobo's picture

"fed head goes on to explain why he believes the Fed's policy should be "dialed back""

I think it's a little too late for that ... perhaps three years ago was the correct time to take the foot off the gas and allow the financial market to build some foundation ... but now, another bubble has been blown. Just imagine what will happen if the Fed "dials back". The market will crash not just in the USA but it will cascade around the globe. Bernanke should not be allowed to leave this mess to someone else. He should be made permanent fed chair.