This is happening tomorrow morning. If anyone in D.C. is going to this, bring an ANWF sign and show Congress that the public supports what these economists are saying.
JEC HEARING: “TOO BIG TO FAIL OR TOO BIG TO SAVE? EXAMINING THE SYSTEMIC THREATS OF LARGE FINANCIAL INSTITUTIONS”
Notable Economists Joseph Stiglitz, Simon Johnson Discuss How Best to Handle Failures of Large Financial Institutions
Washington, D.C. – The Joint Economic Committee (JEC), chaired by Congresswoman Carolyn B. Maloney, will hold a hearing on Tuesday, April 21, 2009 at 9:30 a.m. in Cannon House Office Building Room 210. At the hearing, entitled “Too Big to Fail or Too Big to Save? Examining the Systemic Threats of Large Financial Institutions,” economists including Joseph Stiglitz and Simon Johnson will focus on new policy responses to failures at large financial institutions. The hearing will examine what criteria policymakers and regulators should use to determine when institutions pose systemic risk – at what point financial firms become ‘too big to fail’ – and how regulators should deal with them when they are insolvent.
WHAT: JEC hearing: “Too Big to Fail or Too Big to Save? Examining the Systemic Threats of Large Financial Institutions”
WHO: Joseph Stiglitz, Nobel Prize recipient, 2001; University Professor, Columbia University; former chairman, Council of Economic Advisers
Simon Johnson, Ronald A. Kurtz Professor of Entrepreneurship, MIT’s Sloan School of Management; Senior Fellow, Peterson Institute; former Economic Counselor, International Monetary Fund
Thomas M. Hoenig, President, Federal Reserve Bank of Kansas CityWHEN: Tuesday, April 21, 2009 at 9:30 a.m.
WHERE: Cannon House Office Building, Room 210
You are probably familiar with Stiglitz and Simon Johnson. Hoening, however, is less of a familiar name. As President of the Kansas City Fed, he broke ranks last month with a speech he presented, entitled “Too Big Has Failed” (pdf). It is an absolute must-read. Here’s an excerpt where he describes how temporary nationalization of insolvent banks would work:
How should we structure this resolution process? While a number of details would need to be worked out, let me provide a broad outline of how it might be done.
First, public authorities would be directed to declare any financial institution insolvent whenever its capital level falls too low to support its ongoing operations and the claims against it, or whenever the market loses confidence in the firm and refuses to provide funding and capital. This directive should be clearly stated and consistently adhered to for all financial institutions that are part of the intermediation process or payments system. …
Next, public authorities should use receivership, conservatorship or “bridge bank” powers to take over the failing institution and continue its operations under new management. Following what we have done with banks, a receiver would then take out all or a portion of the bad assets and either sell the remaining operations to one or more sound financial institutions or arrange for the operations to continue on a bridge basis under new management and professional oversight. In the case of larger institutions with complex operations, such bridge operations would need to continue until a plan can be carried out for cleaning up and restructuring the firm and then reprivatizing it. Shareholders would be forced to bear the full risk of the positions they have taken and suffer the resulting losses.
Archein