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What's Geithner telling us that we don't already know?
This final note today, to follow up on our story last week about systemic risk, the idea that the government's going to be paying extra close attention from now on to companies that're too big to fail. Treasury Secretary Geithner's chairing the Financial Stability Oversight Council, as we mentioned, which met today to figure out how to identify those firms that are TBTF.
They're going to look a company's size, how dominant it is, its interconnectedness, its use of leverage or debt, how much cash it has on hand, and how much oversight there is of it by regulators.
Here's my question: After two years of financial crisis, we needed a special government commission to tell us that stuff's important?
I've said it before, and I'm sure I'll say it again: We already *had* a law that was supposed to deal with companies that are "too big to fail." It's called the Sherman Anti-Trust Act.
Kai,
I laughed when I heard your final comment on the show last night about this profound pronouncement. This is one of the major reasons why we had the financial meltdown. The so-called 'talent' running the banks and investment companies were too stupid or greedy to follow the rules re-iterated by Tim G.. I was in banking and lending for over 10 years, and believe me, it's NOT rocket science. Basic math, with some knowledge of probability mixed in to account for the risk factor. Thanks again for the hearty laugh.
