Speaking in Philadelphia last week, Federal Reserve Governor Dan Tarullo made news by calling on Congress to set a hard cap on the maximum size of American financial firms. It may have sounded like tough regulatory talk. In reality, it was an admission of abject failure. Remember Dodd-Frank, the financial reform to end all financial reform? The legislation designed to deliver stability, solvency, and the end of “too big to fail”? Tarullo’s stance means that the 848 pages and 400 regulations of Dodd-Frank somehow didn’t get the job done.
Not only does Tarullo think we need a new law limiting bank size, but the big banks have been getting bigger despite — or perhaps because of — Dodd-Frank. In 2006, America’s five largest banks held assets equal to 43 percent of GDP. Five years later, that figure had expanded to 53 percent.