economy discussion and reply

My choice of podcast was  NPR’s (Links to an external site.)  “How Do We Ensure Big Banks Aren’t ‘Too Big To Fail?’” hosted by Rachael Martin. The podcast was from April of 2016 and the host Martin brings on NPR correspondent Jim Zarroli who covers economic and business news. They discuss the topics such as large banks that are too big to fail and how the Dodd-Frank Act implemented regulations on these large banks. These topics are relevant today because there are more and more banks becoming too big to fail, posing a threat to many Americans and the economy. Martin and Zarroli touched on the political relevance of how the Presidential candidates at the time were addressing this issue. They discussed the differing views of democratic party members, Hillary Clinton and Bernie Sanders, and how Republican Party members dislike the Dodd-Frank Act, wanting to reform the Act. One topic I found in this podcast which is related to the content we covered is how the Dodd-Frank Act affects SIFI’s which are too big to fail, demonstrating government regulation. In this podcast they talk specifically about banks and how the emergency plans submitted by the five largest banks were not good enough for the Federal Reserve or the FDIC. These emergency plans lay out what these banks would do in the event of bankruptcy and if the plans do not meet the standards, regulators have the authority to break them up to reduce systemic risk. These emergency plans seem to be linked to the stress tests conducted by the Fed. The Dodd-Frank Act required the Fed to conduct annual tests for SIFI’s to evaluate capital needs and ensure solvency. This practice of annual tests for SIFIs were abandoned in the summer of 2020. Martin brought up the question as to if the President can force a bank to break up, legally that is, and how it would work. Zarroli responded stating that the Dodd-Frank Act has a process spelling out on how one would go about breaking up a big bank and how the Financial Stability Oversight Council was set up. Zarroli does not go into much more detail about this topic which is unfortunate because I would like to know more. I wonder how complicated the process is to break up a large bank and what factors need to occur or be met for the breaking to be legal. I wonder what the Financial Stability Oversight Council is looking for specifically when identifying risks to the financial stability of the U.S. An article I found, which could further research in this area, was a study made by the  FSOC (Links to an external site.)  looking at the effects of size and complexity of financial institutions on capital market efficiency and economic growth. This study is an update to the 2011 study, since the Dodd-Frank act requires a new report from the FSOC every five years. This report reiterates some of the 2011 report for background and updates areas that are relevant to changes made in the last five years. Much of the report also discusses possible limitations required by section 123 of the Dodd-Frank Act. Some of the possible limitations covered include requirements to carry contingent capital, limits of risk transfer between business units of large financial institutions, and segregation requirements between traditional financial activities and trading or other high risk operations in large financial institutions.