Federal Reserve Chairman Ben Bernanke and other regulators will testify today before the Senate Banking Committee. In testimony prepared for the hearing, Bernanke says the Fed will propose new rules later this summer that will protect the economy from another meltdown of the financial system. Boston University law professor Cornelius Hurley is the director of the Center for Finance, Law and Policy (formerly the Morin Center for Banking and Financial Law) offers the following comments:
“Today’s Senate testimony on “too big to fail” proves that Treasury and the bank regulators do not grasp the essence of the bailout problem occasioned by the random events during the Panic of 2008.
“Market expectations confer a taxpayer subsidy on systematically significant firms. Yet, the bureaucratic jungle created by Dodd-Frank only serves to enhance and expand that subsidy. The law and its consequent regulations distort the semblance of free markets.
“Dodd-Frank addresses too big to fail by conjoining the interests of the government with those of private firms. It is this “stealth nationalization” of the U.S. banking system that Congress should be investigating and that should rank high on the list of issues to be discussed during the ’12 election cycle.”