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'Break up big banks' says Mpls. Federal Reserve chief in his first speech

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Neel Kashkari pulled no punches in his first speech as the president of the Federal Reserve Bank of Minneapolis – calling for the break up of America's biggest banks.

Speaking in Washington on Tuesday, Kashkari said the lessons of the last financial crisis have not been learned, saying: "The biggest banks are still too big to fail and continue to pose a significant risk to our economy," according to Bloomberg.

Kashkari moved to the Minneapolis bank – one of 12 nationwide that make up the Federal Reserve System – after overseeing the Bush administration's $700 billion Troubled Asset Relief Program, which bailed out the nation's beleaguered banks after the onset of the economic downturn in 2008.

Tuesday marked his first speech since taking over at the Fed on Jan. 1, and presented several suggestions for how to avoid a repeat of the bailouts, saying the cost to society of another banking meltdown would be "astronomical."

According to Business Insider, he suggests:

  • Breaking up large banks into "smaller, less connected, less important entities."
  • Turning banks into public utilities by forcing them to hold more capital, so "they virtually can't fail."
  • Taxing leverage throughout the financial system to alleviate risks.

Bloomberg notes Kashkari's views echo "populist sentiments" that have seen the rise of outsider presidential candidates like Bernie Sanders.

Donald Trump, too, has taken a stern line on Wall Street, with CNBC reporting a recent broadside he launched at big banks and hedge fund managers.

Kashkari's views on breaking up large banks are not shared by top fed leaders including Janet Yellen, but according to the Star Tribune he called on lawmakers to put safety and fear of change ahead of the "parochial interests" in the financial industry that has lobbied against similar proposals.

"Options such as these have been mentioned before, but in my view, policymakers and legislators have not yet seriously considered the need to implement them in the near term," he said. "They are transformational, which can be unsettling."

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