Subsidies for big banks would be problem for regulators-Raskin

WASHINGTON Thu Feb 28, 2013 1:25pm EST

WASHINGTON Feb 28 (Reuters) - Any too-big-to-fail subsidy shielding big banks from market discipline and effective regulation would be a problem that financial regulators would need to address, Federal Reserve Governor Sarah Bloom Raskin said on Thursday.

Raskin was asked at a conference in Atlanta about recent reports that the biggest banks are able to borrow money at lower rates because markets believe the U.S. government would bail them out if they were to fail.

She said she had not taken a close look at the calculations, which were conducted by Bloomberg View, but that such a subsidy would be problematic.

"If there is in fact a perception that there is this subsidy - that essentially the market believes exists that keeps big institutions from sort of being reined in by the forces of good discipline, good supervision, good regulation - then I think that is a problem," Raskin said.

"That is a source in and of itself of financial instability that I think any good regulator is going to want to focus on," she said.

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