The era of “too big to fail” banks is over, Federal Reserve chairman nominee Jerome Powell said Tuesday in a confirmation hearing.
Pressed by Sen. John Kennedy, R-La., to answer whether any too-big-to-fail banks remain, Powell responded, “I would say not.”
In saying that there are no more banks so big and powerful that they are sure to receive government bailouts if they falter, Powell went further than his predecessors have. It was also an answer that many senators didn’t want to hear.
Outgoing Fed Chairwoman Janet Yellen has generally tried to avoid stating directly whether any banks are still too big to fail, after the imposition of far-reaching new regulations on the finance system in the past seven years.
Powell, too, initially tried to sidestep the question.
“I think we’ve made a great deal of progress on that,” he first said, citing the higher capital requirements and new rules that regulators have put in place.
But Kennedy asked him again, eventually getting a more straightforward answer.
Senators on both the Right and Left have maintained that bailouts for big banks are likely in the case of financial turbulence. Conservatives have argued that some of the new rules effectively guarantee bailouts. Liberals have charged that the regulations didn’t go far enough or that the biggest banks should be broken up.
