An Important Step in Taming the Big Banks

In 2009, I went to Washington, D.C., to conduct some interviews about the efforts to reform the banking system that were then under way. These efforts eventually led to the Dodd-Frank bill, which President Obama signed into law in July, 2010. At the time, there was talk of cracking down on the too-big-to-fail banks—restricting some of their risky activities and maybe even splitting them up. But, when I got to the Treasury Department, I didn’t find much enthusiasm for these ideas. The key thing is capital, a top official told me. If we force banks to hold a lot more capital, he argued, it will do more than anything else to prevent another blowup.

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