Business

Fed’s Kashkari says banks can’t expect govt to bail them out of every crisis- FT

Banks cannot expect the government to bail them out of every crisis and must increase their equity funding to protect against the next “unexpected shock,” Minneapolis Federal Reserve President Neel Kashkari wrote in an op-ed for the Financial Times.

“Absent these fiscal interventions, losses in the banking sector would have been much larger,” he wrote in the newspaper.

“The public must decide: should banks be resilient on their own or always dependent upon the generosity of taxpayers?”

Laws and rules passed since the 2007-2009 crisis have forced banks to increase the capital they have on hand against losses, but Kashkari has urged even higher requirements.

In April 2020, Kashkari said that big U.S. banks should raise $200 billion in capital and stop paying dividends to prepare for the deep economic downturn due to the coronavirus. “Banks did not heed my advice”, he wrote.