Wednesday, November 16, 2016

Neel Kashkari's Absurdities

One of the Fed Governors, Minneapolis Governor Neel Kashkari has proposed the ultimate absurdity -- capital requirements on banks that are so high that their effect would slice out 40 percent of our GDP.  This is extreme nuttiness.

His entire point is designed to "end too big to fail."  Why does anyone care about "too big to fail?"   Nothing is too big to fail.  If banks had been permitted to fail in 2008, our GDP would probably be fifty percent larger today than it is.

Worrying about "too big to fail" is completely ridiculous.  Dodd-Frank should be repealed and the bailouts should end....permanently.  There is no reason for bailouts.

Banks need to take on more risk, not less.  In a healthy economy, banks as well as other companies will routinely fail now and then.  That's what capitalism is all about.

No one ever fails in fascism or socialism.  The economy doesn't grow in fascism or socialism and widespread poverty is the normal state of affairs.  Who needs that?

Let banks and other business fail. There is nothing wrong with that.  Get rid of the FDIC guarantees.  Investors can put their money in money market funds that consist mainly of US treasuries.  You can write checks on such money market funds and they are no less safe than the FDIC guarantees, since both are backed by the US treasuries.

Unleash the economy and return to real economic growth.  Kashkari's proposal is simply another way to further weaken the American economy.  We should go the other direction and strengthen the economy.

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