CAMBRIDGE, Mass, July 10 The Federal Reserve's
new vice chair all but dismissed the idea of breaking up the
largest U.S. banks, saying on Thursday it is unclear that such a
complex task would help stabilize the country's financial
In his most detailed speech on financial regulation since
becoming the Fed's No. 2 official, Stanley Fischer also floated
the idea of adding a financial stability mandate to all of the
U.S. regulators under the umbrella of the Financial Stability
Oversight Council, a coordinating committee.
Addressing the problem of too-big-to-fail banks - those that
benefit from the public assumption that the government will do
whatever is needed to protect them in times of crisis - Fischer
said the problem was not yet solved and that the Fed and other
regulators must not become complacent.
But he said it is "not clear" that breaking up the largest
banks would end the need for future government bailouts,
pointing out that bankrupt investment bank Lehman Brothers was
not a U.S. financial giant and arguing that the savings and loan
crisis of the 1980sand '90s was due to small firms "behaving
"In short, actively breaking up the largest banks would be a
very complex task, with uncertain payoff," Fischer said in
prepared remarks to the National Bureau of Economic Research.
Fischer, a widely respected economist with extensive
policymaking experience, is expected to play an influential role
in helping to shape U.S. monetary and regulatory policy, and
could prove a powerful ally of Fed Chair Janet Yellen.
(Reporting by Richard Valdmanis; Writing by Jonathan Spicer;
Editing by Leslie Adler)