Minneapolis Fed President Talks 'Too Big To Fail'

MINNEAPOLIS (WCCO) -- The president of the Minneapolis Federal Reserve is trying to think of ways to make banks safer.

Neel Kashkari spoke Monday at the Minneapolis Club on ending the problem of financial institutions that are "too big to fail." It's the idea that if a large institution fails, the taxpayers have to cover its losses or it could be disastrous to the economy.

Kashkari says one idea is to increase capital requirements so banks can absorb losses, but it would be at a cost to both the bank and its customers. He said Monday you can think of it kind of like airport security lines.

"As a society, we decided that the extra costs of safety provided by hand searching all bags outweigh the benefits, so we don't do it," he said "As the terror threat environment, changes for better or for worse, we might adjust the amount of safety we choose to pay for."

The Minneapolis Fed President also said breaking up large banks into smaller ones is a possibility. He says this could happen if banks would be given incentive to restructure themesleves, rather than a government mandate.