Wilmarth, Arthur E. --- "Foreword" [2013] ELECD 433; in LaBrosse, Raymond John; Olivares-Caminal, Rodrigo; Singh, Dalvinder (eds), "Financial Crisis Containment and Government Guarantees" (Edward Elgar Publishing, 2013) xiv

Book Title: Financial Crisis Containment and Government Guarantees

Editor(s): LaBrosse, Raymond John; Olivares-Caminal, Rodrigo; Singh, Dalvinder

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781781004999

Section Title: Foreword

Author(s): Wilmarth, Arthur E.

Number of pages: 2

Extract:

Foreword
Arthur E. Wilmarth, Jr.

In September 2010, US Federal Reserve Board Chairman Ben Bernanke
declared that `[i]f the [financial] crisis has a single lesson, it is that the
`too-big-to-fail' (TBTF) problem must be solved'.1 Notwithstanding
the enactment of reform legislation on both sides of the Atlantic during
the past two years, many policy-makers and analysts believe that TBTF
banks still pose a major threat to financial stability and fiscal policy. On
9 May 2012, former US Federal Reserve Board Chairman Paul Volcker
affirmed that `[t]he greatest structural challenge facing the financial
system is how to deal with the wide-spread impression ­ many would
say conviction ­ that important institutions are deemed "too large or too
interconnected" to fail'.2 The very next day, JPMorgan Chase disclosed
a multibillion US dollar loss from a massive `hedging' strategy that badly
misfired. In response to that disclosure, journalist Gillian Tett warned
that `the swelling size of [banking] groups such as JPMorgan is making the
[financial] system ever more concentrated, in a dangerous way'.3
At the same time, the spreading sovereign debt crisis in Europe revealed
the close linkages between government bailouts of banks and fiscal insol-


1 B.S. Bernanke, `Causes of the Recent Financial and Economic Crisis:

Statement before the Financial Crisis Inquiry Commission' (2 September 2010),
available at http://www.federalreserve.gov/newsevents/testimony/bernanke201009
02a.htm (last accessed 1 October 2012).
2 Statement of P.A. Volcker before the Subcommittee on Financial ...