Henry Paulson Quotes

For market discipline to constrain risk effectively, financial institutions must be allowed to fail. Under optimal financial regulatory and financial system infrastructures, such a failure would not threaten the overall system.

In the future, financial firms of any type whose failure would pose a systemic risk must accept especially close regulatory scrutiny of their risk-taking.

It is probably the case that some regulation of financing will make crises less likely, and I would say higher capital requirements are an almost fail-safe way to make banks safer. But there are a lot of other things that may not be doing that, and so we need to be careful about sort of, like, rushing to one conclusion or another.

Large financial institutions in this country will always play a role that is essential to our economic growth. But they must only be permitted to grow and interconnect, throughout our economy, under careful oversight and with a mechanism for allowing those connections to be broken safely.

Dodd-Frank and independent actions of banks go a long way in terms of progress on capital, liquidity, transparency, "living wills" (plans for winding down a bank in the event of a collapse) and resolutions.

The role of liquidity in systemic events provides yet another reason why, in the future, a more system wide or macroprudential approach to regulation is needed.

If we are really serious about preventing another crisis like the 2008 meltdown, we should simply ban complex financial instruments unless they can be unambiguously shown to benefit society in the long run.

You shouldn't be trying to create a system where no bank fails, but you should be creating one that catches a bank and allows it to fail without impacting the financial markets.

We think it would be safer if the Bank of England had responsibility for solvency regulation of UK-based banks, as well as having an overall duty to keep the system solvent. Otherwise, there could be dangerous delays if a banking crisis did hit.

We need to think deeply about whether we can sustain banks that are not only too big to fail, but potentially too big to bail.

In the financial system we have today, with less risk concentrated in banks, the probability of systemic financial crises may be lower than in traditional bank-centered financial systems.

Financial regulatory reform is one of the top legislative priorities of the Obama Administration.

The 21st Century Glass-Steagall Act will reestablish a wall between commercial and investment banking, make our financial system more stable and secure, and protect American families.

The basic architecture of Dodd-Frank makes sense. At the same time, as a number of regulators and legislators have observed, the act was a complex effort that produced thousands of pages of rules.

We don't have the necessary laws or powers to deal with failing non-bank institutions. If they're a big bank, the depositor has deposit insurance, and the regulators can wind them down without throwing them into bankruptcy.

There are elements of Dodd-Frank that clearly need to be curtailed.

To enable large U.S. banks to support their clients better, the Volcker rule should be clarified.

It's hard to punish and save the banks at the same time.

Operational risk is the risk of loss resulting from bank operational failures, such as rogue traders, fraudulent sales practices, and cyber risks. Operational risk capital is money or assets that banks have to hold to shield the economy from the consequences of these kinds of failures.

Without a doubt, we do support a robust framework for aggregate capital and liquidity and stress-testing.

Limiting the destructive risk-taking by large financial firms and banks which are 'too big to fail' is needed.

Separating out banks and investment banks right now under Glass-Steagall would have very big implications to the liquidity and the capital markets and banks being able to perform necessary lending.

The too-big-to-fail reform project is massive in scope. In my view, it holds real promise. But the project will take years to complete. Success is not assured.

It is worth noting that 'too big to fail' is not simply about size. A big institution is 'too big' when there is an expectation that government will do whatever it takes to rescue that institution from failure, thus bestowing an effective risk premium subsidy. Reforms to end 'too big to fail' must address the causes of this expectation.

The financial crisis was linked to the fact that banks had excessive leverage and too many risky assets. The solution is not to try to dictate to banks what they can do or not do, but to require them to strengthen their capital to absorb potential losses and hold less risky assets.