January 22, 2013The Federal Reserve Bank of Dallas recently published a proposal titled Financial Stability: Traditional Banks Pave the Way. CBAI subsequently wrote Richard W. Fisher, Dallas Federal Reserve Bank President and CEO, in strong support of his prescription to end "too-big-to-fail." READ PROPOSAL. CBAI has long advocated downsizing the mega banks that have become unmanageable and unregulatable but receive government bailouts when they fail. Fisher’s important proposal states, “For a prosperous future, the nation must find lasting financial stability … but where? Not in the big financial institutions at the center of the recent crisis. Not in the misplaced hope of restraining these powerful organizations via regulation. Instead, stability is to be found in a surprising place – all around us. America’s numerous community banks, small and traditionally oriented, demonstrated stability during the crisis and its aftermath. Imparting their virtues to the financial system as a whole will require the end of financial institutions that are too-big-to-fail.” Fisher recommends that these overly complex TBTFs should be restructured into multiple business line entities and only the commercial banking operations should benefit from deposit insurance and access to the Fed’s Discount Window. He cites the significant differences between the 12 financial behemoths that have amassed 69% of the banking industry assets and the 5,500 community banks that represent just 12% of the banking assets. In a speech delivered on January 16th, 2013, Fisher said, “The approach of the Dallas Fed neither expands the reach of government nor further handicaps the 99.8% of community and regional banks. Nor does it fight [the] complexity [of TBTF banks and financial firms] with complexity [Dodd-Frank].” Fisher concluded, “There should be more than two present solutions: bailout or the end-of-the-economic-world-as-we-know-it. Both choices are unacceptable. The next financial crisis could cost more than two years of economic output, borne by millions of U.S. taxpayers. … End TBTF by introducing market forces instead of complex rules, and in so doing, level the playing field for all banking institutions.” READ SPEECH. CBAI, in cooperation with the ICBA, will actively advocate the adoption of the plan during this session of Congress.