Breaking up large financial institutions as a means of reducing systemic risks is both "drastic" and "unfair", according to Atlanta Fed President Dennis Lockhart (voter) speaking in New York on Thursday.
"I have concerns about such an approach," said the Atlanta Fed President. "It strikes me as a drastic measure that could unfairly penalize relatively healthy and successful institutions," he said.
His comments come as the U.S. government begins debating how it will reform the current financial regulatory framework, to prevent another repeat of what some are calling the worst financial crisis since the Great Depression.
Lockhart said that once the financial crisis is resolved, a new regulatory structure will be put in place in the United States to help manage risks more effectively.
Meanwhile, Lockhart was upbeat about the U.S. economy, backing a view that there were "some encouraging signs that support cautious optimism," he said.
Although a U.S. recovery is not likely to be strong, he expects some signs of a turn-around in the United States in the second half of 2009.
Lockhart is a voting member on the FOMC.