Those are both matters entailed in continuing customer relations, and they necessarily imply an element of fiduciary responsibility—i.e., an assurance to customers that they can trust the financial institution to protect their assets—on the part of the bank. These are the essential banking functions. It is hard—I think impossible—within a single institution to impose on those central bank functions a system of highly rewarded—very highly rewarded—impersonal trading that is not protective of client relationships. In any event, it is surely inappropriate that those trading activities be carried out by institutions benefiting from taxpayer support, current or potential.
In essence, when failure takes place or is clearly threatened, the authorities need to be able to cut through existing, and typically laborious, national bankruptcy procedures. To do this will require new “resolution authorities” that can maintain necessary services and fulfill the immediate need for day-to-day financing while the failing organizations are liquidated, merged, or sold, whether in their entirety or piece by piece. Shareholders and management will be gone. Creditors will be placed at risk