Nouriel Roubini's Global EconoMonitor

Nouriel on Bloomberg: TBTF Banks Are Worse Than Before

This morning, Nouriel spoke on “Bloomberg Surveillance” about too-big-to-fail banks (TBTF):

“It’s worse than before, because there has been massive consolidation of the banking system in the U.S. JPMorgan took over WaMu and Bear Stearns, Bank of America took over Country Wide and Merrill Lynch. We had banks that were TBTF before the crisis, and now they’re even bigger to fail than before. There has been much consolidation. The problem has not gone away – as I wrote three years ago, there is no way other than to break up the too-big-to-fail. We have to go back to Glass Steagal.

Asked whether the U.S. political system would permit the necessary reforms, Nouriel noted:

“I would have thought that after the worst financial crisis in 60 years that decision would have been made, but for now, the politics is not going to lead us there.”

Asked about partisan views on Ben Bernanke, and the potential impact of Bernanke’s monetary policy on President Obama’s campaign, Nouriel responded:

“At the margin, he’s an asset in a sense of what the Fed has been doing is reduce the tail risk of another double dip recession. QE, QE2, Operation Twist and now QE3. It is not going to have a huge effect on the economy, but it already has an effect on stock prices. There has been a rally of 15% since December in part because of lower tail risk in the euro zone and in part because of QE3. The margin is beneficial, but only marginally.”

Video below, or go to Bloomberg.

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Håvard Halland Håvard Halland

PHåvard Halland is a natural resource economist at the World Bank, where he leads research and policy agendas in the fields of resource-backed infrastructure finance, sovereign wealth fund policy, extractive industries revenue management, and public financial management for the extractive industries sector. Prior to joining the World Bank, he was a delegate and program manager for the International Committee of the Red Cross (ICRC) in the Democratic Republic of the Congo and Colombia. He earned a PhD in economics from the University of Cambridge.