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Too-big-to-fail problem still haunting us


(AP Photo/Katsumi Kasahara)
(AP Photo/Katsumi Kasahara)
(Bloomberg) -- The Federal Open Market Committee transcripts from 2008, released Friday, are a stark reminder of the damage done by the financial crisis and the terrible choices policy makers face when large, complex financial institutions fail.

In one critical meeting on Sept. 16 (the day after Lehman Brothers Holdings Inc.'s bankruptcy), Tom Hoenig, then the president of the Federal Reserve Bank of Kansas City, stated the problem succinctly: “I think we tend to react ad hoc during the crisis, and we have no choice at this point. But as you look at the situation, we ought, instead of having a decade of denying too big to fail, to acknowledge it and have a receivership and intervention program." Hoenig then warned: "We are in a world of too big to fail, and as things have become more concentrated in this episode, it will become even more so."

See also: Bernanke says Fed increasing financial monitoring

Copyright 2016 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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Nichole Morford

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