New financial giants must be regulated

As the United States government continues to bail out troubled financial firms, the concept of "too big to fail" becomes ever more frightening. The government has "rescued" several distressed companies by brokering deals to combine their operations and assets with surviving giants. Ultimately, these deals will leave us with fewer competitors in the financial space, creating a few mega firms with tremendous economic influence. The recent actions of the government as a result of the current financial crisis have helped set us up for even more grave scenarios if we do not apply prudent oversight.

Examples of government deals include expanding JPMorganChase by incorporating WAMU and Bear Stearns assets, and folding Countrywide and Merrill Lynch into Bank of America. Obviously, we are forming some financial monsters in the wake of this crisis. These newer, bigger entities will have tremendous influence in the global economy.

Clearly, the mega companies the government helped create must be subject to intense regulatory examination. Leadership of these giants must be held accountable for managing the types of risk that helped create the current crisis. There must be consequences for leaders of these enterprises should they fail to properly disclose the risk of their investments, or make investments that run contrary to a published risk policy. The current bailout cannot be viewed as a "free pass" that can be used the next time one of these giants makes ill-advised financial gambles, as seen during the present mortgage debacle. We cannot allow ourselves to be put in a situation that will require the rescue of firms that take unnecessary risk based on their perception that the enterprise they are leading is "too big to fail." These financial giants cannot be allowed to become even bigger "too big to fail" failures.

Jenna Swails

Algonquin