Architect of 2008 bailout says US banks still pose ‘nuclear’ threat to economy

Architect of 2008 bailout says US banks still pose ‘nuclear’ threat to economy

Neel Kashkari, head of the Minneapolis Federal Reserve, said US’s biggest banks are still ‘too big too fail’ and Congress should consider ‘bold solutions’

Kashkari, who is best known for organising the $700bn government-funded bank bailout in 2008, said “serious consideration” should be given to “breaking up large banks into smaller, less connected, less important entities”. Another solution, he said, was to turn the big banks into public utilities by “forcing them to hold so much capital that they virtually can’t fail”.

He said existing measures under the 2010 Dodd-Frank financial reform law designed to prevent another banking system collapse do not go far enough and warned that “we won’t see the next crisis coming”.

“The financial sector has lobbied hard to preserve its current structure and thrown up endless objections to fundamental change,” said Kashkari, who was previous an executive at Goldman Sachs and former Republican politician. “The time has come to move past parochial interests and solve this problem. The risks of not doing so are just too great.”

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