Richard W. Fisher and Harvey Rosenblum write,

we would roll back the federal safety net—deposit insurance and the Federal Reserve’s discount window—to apply only to traditional commercial banks, and not to the nonbank affiliates of bank holding companies or the parent companies themselves, where the safety net was never intended to be.

This is one of several proposals that they make to try to reduce the power of big banks.

The opposite choice is the Gary Gorton approach. That is, acknowledge that the financial sector has changed, and expand the government insurance umbrella to include new instruments, such as repurchase agreements. I may not be characterizing Gorton’s views charitably. I have always disliked them.

The Dodd-Frank legislation is an awkward compromise between these two approaches. It probably satisfies no one. It certainly does not satisfy those of us who want to cut the big banks down to (a much lower) size.