Bill Dudley On Breaking Up Too Big To Fail Banks: "Don't"

Tyler Durden's picture

In a day full of "shocking" announcements, we just got the latest one. Because it must be truly a shock that none other than Goldman's Bill Dudley, who also moonlights as head of the New York Fed, is stoically against the break up of America's systemically critical, massive and 100% untenable FDIC-insured hedge funds, pardon megabanks. Such as Goldman.

From a just released speech ironically titled "Too Big To Fail"

I am not yet convinced that breaking up large, complex firms is the right approach.  In particular, these firms presumably exist, in large part, because there are scale or network effects that allow these firms to offer certain types of services that have value to their global clients.  These benefits might be lost or diminished if such firms were broken up.  In addition, the costs incurred in breaking up such firms need to be considered.  Finally, the breakup of such firms would not necessarily result in a significant reduction in overall systemic risk if the resulting component firms were still, collectively, systemic. 

That is so wrong and frankly moronic, as to border on the grotesque.

These megabanks only exist because the regulatory and financial climate in the US (and the entire world) is one which promotes consolidation to such a point where it is in every bank's best interest to become as big and as systematically critical as possible in the shortest amount of time, and thus to always get bailed out whenever it is threatened with that other part of the Return equation: Risk.

For Dudley to not even remotely admit this is disingenuous, naive and frankly, idiotic.

The remainder of the Bill "just eat hedonic iPads" Dudley's drivel can be found here.