Even BIS Slams “Too Big to Fail”

George Washington Blog
Wednesday, July 1, 2009

The Bank of International Settlements – the “Central Banks’ Central Bank” – slammed too big to fail. As summarized by the Financial Times:

 

The report was particularly scathing in its assessment of governments’ attempts to clean up their banks. “The reluctance of officials to quickly clean up the banks, many of which are now owned in large part by governments, may well delay recovery,” it said, adding that government interventions had ingrained the belief that some banks were too big or too interconnected to fail.

This was dangerous because it reinforced the risks of moral hazard which might lead to an even bigger financial crisis in future.

Given that BIS is the ultimate insider, this is quite a criticism.

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