Thursday, July 21, 2011

Year After Dodd-Frank, Bail Out Banks Too Big To Fail Remains Bigger Problem Than Ever

A year after Congress passed a landmark law intended to tame the excesses that produced the financial crisis, some experts contend that a crucial vulnerability remains: The largest financial institutions are still so enormous that their failure could again bring the financial system to the brink of disaster.

"The next crisis will happen sooner rather than later," said Anat Admati, a professor of finance and economics at the Stanford Graduate School of Business.

"We're not safer and there's still a lot of systemic risks in large banks and in the financial sector overall."

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But on the first anniversary of the act’s passage, the nation's largest banks boast larger holdings than ever.

Their political clout is on the rise, say experts, and the government regulators who are supposed to be looking out for the next wave of reckless speculation are starved of cash.

Meanwhile, stalwart banking industry allies in Congress are seeking to crimp the authority of the regulators on multiple fronts.

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