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The Fed’s Newest Policymaker Wants Congress to Break Up Big Banks

Senate Holds Hearing On U.S. Credit Market CrisisSenate Holds Hearing On U.S. Credit Market Crisis
Neel Kashkari, then interim assistant secretary for financial stability and assistant secretary for international affairs at the Treasury Department, waits for the start of a Senate hearing on October 23, 2008. Photograph by Joshua Roberts—Getty Images

The newest policymaker at the U.S. Federal Reserve is already making waves.

Neel Kashkari, who became the president of the Minneapolis Fed last month, urged Congress to consider radical steps including breaking up the nation’s largest banks in his debut speech Tuesday at the Brookings Institution.

“Now is the right time for Congress to consider going further than Dodd-Frank with bold, transformational solutions to solve this problem once and for all,” the former senior Treasury official said, arguing that Dodd-Frank hasn’t gone far enough to protect the economy from a failure in the financial sector. “Although TBTF [Too Big To Fail] banks were not the sole cause of the recent financial crisis and Great Recession, there is no question that their presence at the center of our financial system contributed significantly to the magnitude of the crisis and to the extensive damage it inflicted across the economy.”

He said that large banks continue to pose a “significant, ongoing risk to our economy.”

Kashkari proposed ideas that he said haven’t been seriously considered by lawmakers, like turning large banks into public utilities by forcing them to hold massive amounts of capital, breaking them up, and taxing leverage throughout the financial system.

While he was at the Treasury, Kashkari played a key role in the auto and financial bailouts, Reuters reported.