In a great op-ed in The Atlantic by James Kwak, Kwak argues that Credit Suisse, a Swiss bank that plead guilty to helping rich Americans evade income taxes for years in terms of billions of dollars, should be punished by revoking it’s license rather than getting the slap on the wrist it is currently receiving.
He argues that this is not a “too big to fail” situation for Credit Suisse for it is a solvent entity.
This is his three step plan to accomplish such an end:
First, Credit Suisse could simply be allowed to operate for, say, three years—enough time to sell off its assets and close its positions without having to take “fire sale” prices. Second, the bank could create a new, licensed subsidiary. That subsidiary could take over all of Credit Suisse’s current positions that can’t be closed easily, and then authorized to operate solely in runoff mode. Third, the government could create a new entity (roughly like the Resolution Trust Corporation) that would buy Credit Suisse’s more complicated assets and positions and then unwind them over as long a period as necessary, eliminating the pressure to sell quickly at a loss.
After 2008, we cannot allow big financial institutions operate with impunity when they are breaking the law with so much on the line. This insightful argument by Kwak could lead to a new blueprint for dealing with the corruption of Wall Street.