Ben Bernanke doesn’t like systemic risk! Shocking, we know. In a speech he gave in Orlando, Florida, the Chairman expressed outrage at the bailouts of too big to fail companies and said shareholders should not be sheltered from losses.
“It is unconscionable that the fate of the world economy should be so closely tied to the fortunes of a relatively small number of giant financial firms,” Bernanke said. “If we achieve nothing else in the wake of the crisis, we must ensure that we never again face such a situation.”
There are several plans that aim to accomplish this task. Bernanke put forth some suggestions of his own, including the idea of having “living wills” for large companies. The wills would consist of a plan that would allow large financial institutions to wind down in an orderly way should something go wrong.
“An idea worth exploring is to require firms to develop and maintain a so-called living will, which will help firms and regulators identify ways to simplify and untangle the firm before a crisis occurs,” Bernanke said.
We sort of like the image of a bank laying in a hospital bed with a bunch of executives and regulators whispering about pulling the plug.
Bernanke Says Large Bank Bailouts ‘Unconscionable,’ Must End [Businessweek]