The first is on peer review article on Federal Bank of New York exploring the economic policies in large and complex banks aiming to explain why they are too big or even bigger to fail (João, 2014). From the research carried out between 1985 and 2009, the article stands to be a reliable source capturing the issue in depth. In explaining the points, the evidence is got from the banks bond markets. The idea is embraced when the banks have expectations that the government comes in and saves the largest banks from failure by creating a subsidy.

In creating a subsidy, the government encourages investors to discount risk when they fund the banks (João. 2014). The funding that the largest banks tend to enjoy cannot even be compared to that of large nonfinancial institutions. The funding is an indication that there is a too big to fail status given to larger banks which ultimately gives them a competitive advantage (João, 2014). I tend to query myself whether the funding is economically viable. Further, I am also wondering the position of the banks to raise funding with long-term bonds in the event that the regulatory changes fail to address the too-big-to-fail status.

The second article explores the measures that have been put in place to ensure that the banks are able to cover for themselves during recessions. It is a reliable source as it is explored by a professor at reputable University of Maryland who notably was assistant secretary for economic policy at the Treasury Department (Phillip, 2013). This move has been put in place because the companies that were seen to be too-big-to-fail gave rise to several problems raising the question of moral standards as they could always figure out that their losses would be covered by taxpayers (Phillip, 2013).

These regulations are to make the banks pay for insurance to get cover and expected to fund themselves with more capital than small banks. One question is whether the changes in place are adequate to end the future government bailouts. Additionally, are the changes good enough or they would hinder activities of the banks?

References

João, S., (March 2014). Evidence from the Bond Market on Banks’“Too-Big-to-Fail” Subsidy Retrieved from<http://www.newyorkfed.org/research/epr/2014/1403sant.pdf>.Accessed on 11^th July, 2014.

Phillip, S., (November 2013). Reducing the Impact of Too Big to Fail.Retrieved from <<http://economix.blogs.nytimes.com/2013/11/29/reducing-the-impact-of-too-big-to-fail/?_php=true&_type=blogs&_r=0>> Accessed on 11^th July, 2014.