The Obama administration should thin the ranks of too big to fail banks

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The results of the Federal Reserve's "stress tests" on 19 of the country's largest banks were among Washington's worst-kept secrets, with abundant leaks about the multibillion-dollar capital shortages at Bank of America and other giants. So it came as little surprise Thursday afternoon when the Fed's Board of Governors announced that only nine of the banks had come through the tests with no need for additional money.

The other 10 will be required to raise nearly $75 billion from either private investors or the federal government. That amount was less than some observers had feared, and Treasury Secretary Timothy F. Geithner called the results "reassuring.” But our reaction is just the opposite. We're dismayed by the prospect of the government taking an even bigger stake in the banking industry. And we're still waiting for some market-based mechanisms to deter banks from becoming so systemically important that the government is compelled to rescue them.

The Obama administration should thin the ranks of too big to fail banks - Los Angeles Times

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