Finance & Loans

Restructure or Downsize, Says Blair to America’s Biggest Banks

In only the last four months of her job as the chairman of the Federal Deposit, Sheila Blair is insistent on getting rid of the paradigm that some banks are “too big to fail”. And if they cannot show that they can dismantle easily in the wake of another financial crisis, then it is time that taking extreme measures such as downsizing might be the only way to go from here.

And some of the steps that these banks will have to take is to realign their legal structures as well as set up foreign subsidiaries which will make it easy for regulators to liquidate these banks if and when, another situation involving a financial crisis occurs again.

At another level altogether, she was clear about stating that just because some firms are big that doesn’t mean that they deserve special treatment as opposed to other businesses haven’t received  in the past.

These statements have clear implications for some of the biggest banks in the United States such as JP Morgan Chase, Bank of America and Citigroup who have to submit their “living wills” to United States Regulators at the end of this year.

And since this process has been put into place so that there is no repeat of the bailouts made by President Bush to the American International Group, and in which the Lehmann Brothers bankruptcy resulted in frozen markets.

However, even though she has made it clear that banks will have to change their business models to show credibility in the coming months, she is sure that this process will not result in the breakups of banks in the United States.