White House advisor Paul Volker spoke out against President Obama's plans to overhaul financial services oversight, claiming it would lead to more risk-taking by firms.According to ABC News, the former Federal Reserve chairman testified before the House Financial Services Committee Thursday and expressed doubts about the administration's plans to give special designation to certain financial institutions that pose a threat to the economy at large, subject them to stringent supervision and make them submit resolution plans in the event of a failure.
Volker said a plan like this could embolden these "too big to fail" firms to take even more risks because they know they would be ensured of a bailout. Meanwhile, those institutions not part of the "too big" club would be left out in the cold.
"In fair financial weather, the important institutions will feel completely hobbled by stricter standards," he said in his testimony. "In times of potential crisis, it would be the institution left out of the "too big to fail" club that will fear disadvantage."
For the entire article, see Obama Economic Adviser Doubts President's Plan.