This is pretty funny, if you (like me) have a dark sense of humor. The president of the Kansas City Fed, Thomas Hoenig, writes in the Financial Times about reports that UBS is considering moving its headquarters out of Switzerland: "Recent news reports, however, suggest that Swiss regulators may even favour UBS moving its investment banking activities abroad, so that their government no longer would face the risk of bailing out a company that is twice the size of the Swiss economy."
Mr. Hoenig says America shouldn't accept it under the current rules.
Why is this funny? I think because it's an unexpected reversal of the usual scenario in which countries, cities, or states compete because they want companies to set up headquarters or offices in their jurisdiction, or to stay if they are already there. In the ordinary case, the jobs or tax revenue that such a decision brings make it desirable for a company to stay. But the scenario Mr. Hoenig describes illuminates the way that in some sense these too-big-to-fail banks, for all their political and financial might, have become in some ways undesirable. They are so powerful no one wants them, partly for fear the bank might actually not be as powerful as they think they are (weak enough to need a rescue), but still powerful enough even in their weakened state not to be allowed to go down without government help.
Link via Economic Policies for the 21st Century.
