FOR IMMEDIATE RELEASE:          CONTACT:  Erica Hurtt 

January 21, 2010                            (202) 457-8783                                          

FORUM RESPONSE TO PRESIDENT OBAMA’S PROPOSAL TO LIMIT THE SIZE AND SCOPE OF FINANCIAL INSTITUTIONS

Forum President & COO Rob Nichols released the following statement today:

WASHINGTON, D.C. – “We support sensible efforts to modernize the U.S. financial supervisory framework. However, proposals to preemptively break up large, well-managed, and well-capitalized banking companies, or to reimpose Glass-Steagall restrictions, are based on a misdiagnosis of the causes of the financial crisis.

“Trading, proprietary or otherwise, did not lead to the financial crisis.  Rather than arbitrarily banning certain activities, or setting arbitrary size limits, our policy response should focus on improving risk management, internal controls, corporate governance, and supervisory oversight, and creating the authority to resolve large financial institutions.

“The problem of ’too-big-to-fail’ isn’t that some institutions are large, it’s that there is currently no statutory authority to wind down a financial conglomerate in the way that the FDIC is currently authorized to unwind banks.  More effective supervision, coupled with the authority to seize and wind down large firms, is the appropriate remedy ‘to too-big-to-fail’.

“Large institutions provide significant value to customers – in the sheer size of credits they can deliver, in the array of products and services they can provide, and by their geographic reach – that smaller institutions simply cannot provide.  This unique economic value is particularly important to large, globally active clients and contributes directly to economic growth and job creation.  Large institutions are also far more diversified in their business mix as compared to smaller institutions, which tend to be engaged in fewer businesses and regions and, therefore, are exposed to greater concentration risk.  In this regard, larger institutions are more stable than smaller institutions.  Rather than being a source of risk, size can mitigate risk.

“To be a global financial leader, the United States needs institutions of all sizes, business models, and areas of expertise.  And being a global financial leader is an enormous strategic advantage for the U.S. economy and American businesses, workers, savers, and investors – an advantage we should work hard to preserve.” 

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