An observation on "breaking up the banks"

[brooklynite]

My wife is a Wall Street lawyer, and while she doesn't object to breaking up "too big to fail banks", she observes that "smaller" doesn't equal "safer". Just think back to the Savings & Loan crisis of the 1980s. Small banks can make the same mistakes as large ones, and while they may not have the same level of net economic impact, depositors and homeowners will still be at risk.

[safeinOhio]

1. Competition equals

better prices and less power to dominate and control markets.

[BlueStateLib]

14. Banks have make a profit to pay

lease, electricity, employee salaries, taxes. Bernie Sander's plan would drive up the cost of banking

[GeorgeGist]

16. You don't understand profit.

[safeinOhio]

20. Above those cost they

are making huge profits.

[Gregorian]

2. A small bank won't destroy the economy.

A small bank won't get huge bailouts at taxpayer expense.

[ejbr]

15. +1 n/t

[Ed Suspicious]

3. Breaking up the banks will decrease the net economic impact of a future bank failure.

[EdwardBernays]

4. S&L

Was the failure of government to regulate. And governments inability to make sound fiscal policy.

Totally. Different.




Lol.


The fact is that smaller and more diverse is safer as long as something doesn't affect all of them at once. And even then it's relatively safer in most circumstances, due to the spreading of risk.

[djean111]

5. Less risk.

We are quite aware that there is no such thing as "no risk". There is a middle ground, and keeping the huge banks in place is not the way to go.

[Bradical79]

6. That seems like a contradiction

My wife is a Wall Street lawyer, and while she doesn't object to breaking up "too big to fail banks", she observes that "smaller" doesn't equal "safer". Just think back to the Savings & Loan crisis of the 1980s. Small banks can make the same mistakes as large ones, and while they may not have the same level of net economic impact, depositors and homeowners will still be at risk.

That sounds safer to me. There's a massive difference between saying something is "safer" on a large economic scale and saying there is no risk on an individual level. Saying risk to depositors and homeowners will still exist doesn't really mean much.

[Douglas Carpenter]

7. smaller banks may or may not be safer for the individual account holder

But they are certainly a lot safer for the economy as a whole. A small local bank crashing is simply not going to drag down the global economy. A major bank like Lehman Brothers crashing could very likely do that.

[AgingAmerican]

8. You miss the point of it all

Small banks can't take down the economy with them if they fail. That's the point of breaking them up.

[enid602]

9. international

Canada, Germsny, France, Japan, UK , Spain, etc all have economies dominated by small number of very large banks. What are the international economic effects of unilaterally breaking up US banks. Lots off raink and file jobs on Wall St.

[dmosh42]

10. In the 80s those small banks were not backed by the taxpayers if they were 'commercial". Only .....

savings banks were insured. Also, going back in my memory, to the 50s, bankers who did illegal activities were jailed and exposed in the press. This was the first failure where I haven't seen anyone jailed for illegal activities, probably because our government is part of the corruption.

[Armstead]

11. Fewer depositors and homeowners atr risk...and more important

makes us less dependent on the whims of a handful of monopolistic monsters.

Banks and other financial institutions and the economy overall did fine before they were deregulated and allowed to consolidate and engage in bad behavior on a massive scale.

And, bottom line....We need a more broadly based and diverse system and honest competition and institutions of many sizes because.....well, I was raised to believe those are all good things, and a whole lot better than monopolistic empires.

[antigop]

12. Your wife is a Wall Street lawyer. Well, that explains a lot. nt

[Half-Century Man]

13. The S&L crisis was caused by R Reagan deregulating credit unions.

Reinstate the regulations that worked so long and so well.
Enforce anti-trust regulations.
Break up monopolies.

[ljm2002]

17. "and while they may not have the same level of net economic impact"...

...kinda makes the point, eh?

Are you arguing that because breaking up the too-big-to-fail banks does not solve 100% of the problems in the financial industry, that it is better not to do it at all?

Whatever happened to "Don't make the perfect the enemy of the good"???

[brooklynite]

18. When did I say we shouldn't?

I also said my wife didn't object. I'm joint pointing out that the outcome may solve all ills.

[ljm2002]

19. Well your own post...

...shows why "smaller" actually does equal "safer", at least from a macro perspective. IOW, while people can still lose $$$ when a smaller bank fails, it is much less likely to precipitate a larger crisis. Which is the whole reason for doing it.

You are the one who took pains to try and convince us that it will have little effect if implemented, even as your own post suggested otherwise, making your position on this matter is less than crystal clear.

I'm glad to hear you and your wife are for Bernie's proposal to break up the big banks.

[Motown_Johnny]

21. Which is why Bernie is also pushing for regulatory reform.

https://berniesanders.com/statement-by-senator-bernie-sanders-on-wall-street-and-the-economy/

^snip^


We cannot have a safe and sound financial system if we cannot trust the credit agencies to accurately rate financial products. And, the only way we can restore that trust is to make sure credit rating agencies cannot make a profit from Wall Street.

Investors would not have bought the risky mortgage backed derivatives that led to the Great Recession if credit agencies did not give these worthless financial products triple-A ratings – ratings that they knew were bogus. And, the reason these risky financial schemes were given such favorable ratings is simple. Wall Street paid for them.

Under my administration, we will turn for-profit credit rating agencies into non-profit institutions, independent from Wall Street. No longer will Wall Street be able to pick and choose which credit agency will rate their products.