The Case for Breaking Up the Big Banks

I was pleasantly surprised to hear Federal Reserve Bank of New York President William Dudley say in a recent speech that solving the too big to fail problem may require breaking up big banks. He is in favor of trying the resolution authority granted in the Dodd-Frank legislation first, but this is an untested solution to the too big to fail problem that attempts to isolate and dismantle large, troubled institutions while protecting the rest of the economy.