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Break Up the Banks?

Neel Kashkari, the president of Federal Reserve Bank of Minneapolis.Neel Kashkari, the president of Federal Reserve Bank of Minneapolis.
Neel Kashkari, the president of Federal Reserve Bank of Minneapolis.Photograph by David Paul Morris/Bloomberg—Getty

Yesterday’s surprising comments from the new president of Federal Reserve Bank of Minneapolis, Neel Kashkari, deserve attention, not because he occupies a position of great power – he doesn’t – but rather because of who he is.

Kashkari spoke at the Hutchins Center at Brookings – fast becoming the place for discussions of monetary and banking policy. He said that Dodd-Frank had not gone far enough in regulating the banks, and suggested Congress consider “going further” with “bold transformational solutions” – by which he meant breaking up the big banks.

What makes this remarkable is that Kashkari is 1) a Republican, 2) a former banker at Goldman Sachs, and 3) an ambitious young man with clear political ambitions, having recently challenged Jerry Brown in the race for governor of California. He also knows his topic, having managed the U.S. Treasury’s $700 billion Troubled Asset Relief Program.

The big banks should view Kashkari the way a miner views the canary. When a smart and ambitious political operator chooses to raise an issue like this in his very first speech – winning kudos from Bernie Sanders on the campaign trail – it is not a good sign. Odd currents are roiling U.S. politics.

And by the way, another sign can be seen in South Carolina, where Donald Trump’s protectionist message seems to be attracting voters in a state that has seen stunning growth in exports over recent years.

Fasten your seat belts: business is facing more than just the odd pocket of turbulence ahead.

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