Which of the following solutions have been proposed to solve the too-big-to-fail problem?

A) Break up large, systemically important financial institutions. B) Impose higher capital requirements on large, systemically important financial institutions. C) Do nothing, since Dodd-Frank effectively eliminated the problem. D) All of the above have been proposed

Question

Business

Kenneth Boone

14 February, 22:40

Which of the following solutions have been proposed to solve the too-big-to-fail problem?

A) Break up large, systemically important financial institutions. B) Impose higher capital requirements on large, systemically important financial institutions. C) Do nothing, since Dodd-Frank effectively eliminated the problem. D) All of the above have been proposed

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Answers (1)

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Cory Shepard · Answer 1

D) All of the above have been proposed

Explanation:

The problem with the too big to fail financial policy is that financial institutions that are considered too big started to assume greater investment risks since they were treated differently than other not too big banks.

For example, if the FDIC decides that a too big to fail bank is about to fail, they will use the purchase and assumption method to ensure that the bank's depositors don't suffer losses, but the government assumes the losses and the government is paid by all of us.

The Dodd-Frank Act makes it harder for the Federal Reserve to bail out financial institutions, but that is simply not enough. Big banks have played enough with the taxpayers' money and should be held responsible for their actions. They at like spoiled children that go around breaking things because their parents will pay for them.