3 Questions on Financial Stability
Simon Johnson (Herald Tribune – FL)
September 1, 2011

“The Dodd-Frank financial legislation of 2010 created a Financial Stability Oversight Council, tasked with taking an integrated view of risks in and around the financial sector in the United States. Known as the FSoc (pronounced EFF-sock), the council comprises all leading regulators and other responsible officials, headed by the Treasury secretary. But three important and related issues emerged this summer that the FSoc needs to consider quickly: impending bank mergers that could create two more too-big-to-fail banks; whether to force the breakup of Bank of America; and how to rethink capital requirements for large systemically important banks, particularly as continuing European sovereign debt problems undermine the credibility of the international Basel Committee approach to bank capital.… The Basel Committee on Banking Supervision has proposed a methodology for systemically important institutions, but it rests on a very weak analytical basis, as Americans for Financial Reform pointed out in a recent letter. The FSoc would be making a very bad mistake if it continued to follow the European lead that set the lowest common denominator at Basel. Click here for more.