Put another way, I don’t see a justification for creating a conglomerate firm — one which combines a government-guaranteed banking firm with a proprietary risk taking firm — unless the idea is that the higher risk trading profits will benefit the lower risk part of the firm, while the lower risk part of the firm will anchor the higher risk trading ... how? What value does the lower risk part contribute — oh, I remember, a government guarantee. Why in principle couldn’t investors get the true economic value of each by buying shares of each? Isn’t the only real point of bundling these two firms together in a single holding company in order to tap the government guarantee for the entity as a conglomerate, implicitly in ordinary times and explicitly when the the tail-risk event occurs? If someone wants to explain to me what the additional value-added of creating this conglomerate is apart from the public subsidy, I am happy to be persuaded, but at this moment I can’t see what it is.
"Treasury" is essentially the lobbying arm of Wall Street at this point. I can't even begin to imagine why someone would take a proposal like this one seriously, other than as a blueprint for the absolute last thing that should be done.
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