Obama and the New Banking Policies

US economical decline was started when the banks went in worst situation and announced the US worst banking sector got collapsed and then a chain of banks failure started. If a bank goes bad, its chartering institution turns it over to the Federal Deposit Insurance Corp. The FDIC follows an orderly process for putting the bank in receivership, then liquidating its assets or selling it off to a healthy institution. Deposits are guaranteed, and there’s no threat to the overall financial system.

The most important part of President Obama’s remarks on financial reform dealt with the need for a policy to deal with firms deemed “too big to fail” — enterprises so large and interconnected that a collapse would pose a threat to the entire system.

No similar process exists for a highly diverse financial supermarket like Citigroup or Bank of America, or Lehman Brothers, which collapsed a year ago and triggered the financial crisis. As Obama noted, proper resolution authority is needed to put an end to the notion of “too big to fail.” Officials shouldn’t face the stark choice of letting a large firm fail or bailing it out with public money.

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