Big banks are government-backed: Fed’s Hoenig

Editors note:  Fractional reserve banking establishments are not free market institutions.  They are preferred vendors of government services.

CHARLOTTE, North Carolina (Reuters) – Big banks like Bank of America Corp and Citigroup Inc should be reclassified as government-sponsored entities and have their activities restricted, a senior Fed official said on Tuesday.

The 2008 bank bailouts at the height of the financial crisis and other implicit guarantees effectively make the largest U.S. banks government-guaranteed enterprises, like mortgage finance companies Fannie Mae and Freddie Mac, said Kansas City Fed President Thomas Hoenig.

“That’s what they are,” Hoenig said at the National Association of Attorneys General 2011 conference.

He said these lenders should be restricted to commercial banking activities, advocating a policy that existed for decades barring banks from engaging in investment banking activities.

“You’re a public utility, for crying out loud,” he said.

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