For all the hand-wringing about “too big to fail,” almost nothing is being done about it. Regulators promise to be more vigilant but cannot offer anything that inspires confidence they will be able to successfully spot risk bubbles.
So what can be done? Maybe nothing. That’s the conclusion of Liz Moyer in Forbes today. And that’s really such a problem since it’s not size so much that matters as inter-connectedness. And there’s nothing that can be done about that.
One solution advocated by Bair and others: break up big banks. Citigroup is splitting itself up after years of empire building that created a company many considered to unwieldy to manage effectively.
But that won’t really fix things. Lehman was far from the biggest Wall Street bank, in fact it was the smallest of the big four still standing after the collapse of another relatively small firm, Bear Stearns, in March. Interconnectedness was the problem. And in our increasingly sophisticated and complex global financial system, it still is. How to eliminate that risk? This may be tough to swallow, but the truth is that you can’t.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.