Even Bigger Than Too Big to Fail

Asserting that it "is among the strongest banks in the industry," Citigroup announced on Monday that it soon pay $ 20 billion federal bailout money. This from a bank that has been in the red for most of the past two years, expected to limp through 2010 amid a torrent of loan losses, which saw its stock price after the close announcement at a measly $ 3.70 a share - and that, like other big banks, are still reluctant to lend.

Meanwhile, the Treasury Department, which seems no qualms about Citigroup's self-declared force, plans to sell its $ 25 billion stake in the next six to 12 months.

Planned exit from Citigroup bailout - such as Bank of America's earlier this month - is welcome if the bank is the picture of health. But their main goal is to come out from under cover pay the bailout and other restraints. The Treasury Department's approval is a strong reminder of the political power of banks, though the economy so much damage they continue to struggle.

Over the weekend, President Obama summoned the country's largest bankers in Washington, but some of the biggest recipients of taxpayers' money, including Citigroup and Goldman Sachs, will not bother to make the extra effort to get there ahead of time to avoid the predictable winter weather that grounded their flight.

Mr Obama is right when he said banks owe "a solemn commitment" to taxpayers, and he got some promises to lend more. But that is more credible if the administration is held in banks' feet to the fire in the first place and did not agree so quickly freeing them from the restraints bailout. The fact is that the taxpayers are still very much on the hook for a banking system shaping to be much riskier than the one that led to disaster.

Big bank profits, for example, still almost came courtesy of taxpayers. Their trading income is financed by more than a trillion dollars' worth of cheap loans from the Federal Reserve, where some of their most toxic assets are collateral. They benefit from the immense federal guarantees of loans, but they are not lending much. Lending business, notably, is too restrictive.

What profits the banks make almost came from trading. Many large banks are happy to depend on Lifeline from the spoon and hang onto their properties depend toxic for a rebound in prices. And the whole system has grown more concentrated. Bank of America is considered too big to fail before the meltdown. Since then, it acquired Merrill Lynch. Wells Fargo took over Wachovia. And JPMorgan Chase gobbled up Bear Stearns.

If the goal is to reduce the number of large banks that taxpayers should be saved at any cost, the country is moving in the wrong direction. The growth of the largest bank ensures that the next bailout will be even greater. The banks are more likely to take on excessive risks because they fully trust the rescue.

The White House's proposal to overhaul financial regulation have ideas for the banks too big to fail. The House passed a bill last week requiring large banks have larger capital cushions to absorb losses. It gives the government power to seize and dismantle large financial company in danger of imminent failure and bank order to pay for a $ 150 billion fund to cover the cost of any future trouble. It grants power regulators to limit the operation or even break up the big banks considered too risky, even if they appear healthy.

The provisions still seem vulnerable to being gamed. The Senate, which is likely to pass its version of the deal until next year, to explore more direct measures, such as the ban banks beyond a certain size, measured by their responsibilities.

If we learned anything the past few years, it is that the bank too big to fail pose too much of a risk to the economy. Any serious effort to reform the financial system must ensure that no such banks exist.