Posted Without Comment: Trouble For Big Banks

January 8, 2009 by Douglas A. McIntyre

From Bloomberg:

The biggest U.S. banks may face the threat of lower profits or pressure to break up under greater regulation following the financial crisis.

Federal Reserve officials have made tackling the issue of firms that are too big to fail a priority. Options may include banning or restricting activities that could threaten the stability of the financial system, analysts said.

“Rates of return are going to be smaller,” said Vincent Reinhart, a former director of the Fed’s monetary-affairs division who is now resident scholar at the American Enterprise Institute in Washington. “That will be the quid-pro-quo for having the government safety net.”

Douglas A. McIntyre