SAN FRANCISCO (Diya TV) — Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said he’s cautiously optimistic about the response to his proposal to safeguard taxpayers and the economy from the hardships of another financial crisis.
His proposal, named the “Minnesota Plan,” would force the nation’s largest banks to maintain a much larger financial buffers against unexpected losses.
The prevention of another financial crisis is not a partisan issue, Kashkari said during a recent podcast interview. “A lot of what I read is that a lot of the Republican leaders are frustrated that Dodd Frank has imposed costs on the economy but has not addressed too big to fail,” he said. “I agree with them that it has not addressed too big to fail.”
The phrase “too big to fail” is used for describing the U.S. financial institutions that are so large and so important to the financial system that taxpayers would be forced to pay to prevent their collapse.
“I think there are people on the other side of the aisle who say we really need to get serious about these big banks and address that once and for all,” Kashkari said.
According to analysis by the Federal Reserve Bank of Minneapolis, the proposal would reduce the risk of a financial crisis from 67 percent to less than 10 percent. However, the reduction would come at the cost of further economic growth.
Regardless, the cost doesn’t necessarily spell the demise of his proposal, Kashkari said.”Within a year there will be active serious discussion of ‘Have we done enough? Should we do more?'” Kashkari said. “And if we should do more I think our plan will be in the mix of discussions of ‘This is a credible alternative.'”