‘Astronomical’
“The cost to society of letting a reactor melt down is
astronomical,” said Kashkari, who was a Goldman Sachs Group Inc.
banker before joining the Treasury during the administration of
Republican President George W. Bush. “Given that cost,
governments will do whatever they can to stabilize the reactor
before they lose control.”
Kashkari, 42, said the Minneapolis Fed will hold a series of
events and collect public and financial-industry input before
making proposals by the end of this year on how to address the
issue.
Kashkari, asked about the economy and monetary policy after the
speech, stuck to the Fed’s January statement and said if the
reality ends up like the outlook, the U.S. will be headed in a
“better direction.” He will be a voting member of the interest-
rate-setting Federal Open Market Committee in 2017. The Fed’s
Board of Governors in Washington sets policy for bank
supervision, which is implemented by the 12 regional Fed banks
including Minneapolis.
In testimony before Congress last week, Yellen said regulations
imposed since the financial crisis have had “very substantial
payoffs in the form of a much more resilient and stronger,
better capitalized, more liquid banking system.”
Fed spokesman Eric Kollig declined to comment on Kashkari’s
initiative.
Dallas, St. Louis
Kashkari joins several other regional Fed presidents outside of
the major U.S. banking centers who have made similar statements
about too-big-to-fail policy. Former Dallas Fed President
Richard Fisher proposed that big banks be “restructured into
multiple business entities,” while St. Louis Fed chief James
Bullard has backed limiting the size of individual U.S. banks to
a proportion of gross domestic product.
Kansas City Fed President Esther George, a former bank
regulator, said in a 2014 interview that she was “disappointed
but I guess not surprised” that the problem of too-big-to-fail
banks remained and called for “meaningful consequences” for
banks that don’t submit adequate “living wills,” or plans to be
resolved if they were to fail.
Kashkari said Tuesday that the financial industry has “lobbied
hard to preserve its current structure and thrown up endless
objections to fundamental change.” He rejected the argument that
U.S. banks would be at a disadvantage to competitors in nations
with looser regulations, because the U.S. “should do what is
right for our economy.”