Elizabeth Warren knows.
Unwinding the Treasury Department's $700-billion rescue program will be difficult, so long as there is an "implicit guarantee" that the federal government will continue to save failing banks, according to a new report.
The 2008 Troubled Asset Relief Program (TARP) has ultimately prompted banks to adjust "to the notion... [they] will be safe, no matter what," explained Elizabeth Warren, chairwoman of the Congressional Oversight Panel that has been tracking those dollars.
"The whole market has adjusted to the notion that the big banks will be safe no matter what, and they can start planning their business approaches accordingly," Warren told CNBC on Thursday. "And thats dangerous."
"This business of regulatory reform that's going through Congress... is really where this is going to all come down," she added, as those reforms would allow the federal government to "credibly say to any large financial institution, 'If you screw this up badly enough, you really can be liquidated.'"
Without that legislation, "At the end of the day, when TARP is over, it's not really over," the chairwoman continued.
Warren's remarks on Thursday coincide with the Congressional Oversight Panel's latest look at the TARP's management and execution. The report, released this morning, stresses the legacy of the 2008 bailout program might be a lingering impression that the federal government will rescue failing firms that pose systemic risks to the nation's economy… [emphasis added]
Inserted from <The Hill>
Here is a video in which she lays it out in terms that even an economic neophyte can understand. If you spend ten minutes watching it, you will come away with a clearer understanding of what needs to be done.
Note that when asked whether bankster banks should be broken up or provisions made for their takeover and orderly liquidation in the event of crisis, she favored a little bit of both. I wish Obama would dump Terrible Timmy and put Warren in his place.