Another Federal Reserve official is speaking out against Too Big to Fail policies.
Esther George, president of the Kansas City Fed, believes regulators including the Federal Reserve did not fully take advantage of rules that could have helped them curb risky banking practices leading up to the financial crisis.
"During the recent crisis, we had a number of powers that might have been used on Too Big to Fail institutions, but were not employed to any notable extent," George said at the Levy Economics Institute's Hyman P. Minsky Conference in New York, Wednesday.
"The most critical issue in addressing Too Big to Fail concerns is having policymakers with the resolve to follow through," she added.
For example, regulators should have been enforcing rules that give banks only 180 days to clean up their act, if they're not well capitalized or well managed, she said.
That provision, from the Gramm-Leach-Bliley Act of 1999, gives the Fed the ability to force financial holding companies to divest or terminate financial activities, if it finds a bank is engaging in activities deemed not "safe and sound," and fails to enact changes within 180 days.
George also voiced her support for the Volcker Rule, which eliminates proprietary trading by banks and thrifts, and said she supports higher capital requirements phased in sooner rather than later.
Their report found that the five biggest American banks control 52% of all banking assets in the United States.
Mortgage servicers will have a lot of work to do to prepare for the coming wave of principal reductions unleashed by the $26 billion mortgage settlement.
That's because they haven't been doing many of them up until this point.
Only 8.5% of loan modifications in the fourth quarter of 2011 involved principal reduction, according to the latest government data. That's a mere 9,867 troubled homeowners for the quarter.
While that's up more than MORETami Luhby - Mar 28, 2012 2:34 PM ET
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