Friday, June 25, 2010

“Chuck Prince” Is Going To Run This Bank (Into The Ground)

“Chuck Prince” Is Going To Run This Bank (Into The Ground)

“Breaking up big banks would actually increase system risk” is a refrain heard from top administration officials, ever more vocal after they helped kill the Brown-Kaufman amendment (that would have limited the size and leverage of our largest banks) on the floor of the Senate.

But while Mr. Geithner and his colleagues are still taking their victory laps and congratulating themselves on retaining “business as usual” after the biggest crash-and-bailout in world financial history, educated opinion starts to feel increasingly uncomfortable.

People who worry seriously about system risk break the problem down into several distinct buckets, including the nature of shocks and the way these are propagated across the system.  In this typology, the “Chuck Prince problem” is in a class of its own.

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