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They are obvious and breaking up the banks is a popular topic of speculation in the finance industry. What's a mystery is why it is taking so long for mainstrea

They are obvious and breaking up the banks is a popular topic of speculation in the finance industry. What's a mystery is why it is taking so long for mainstream econ and op-ed writers to catch on. Paul Krugman, for example, proposed that big banks like Citibank provide value by having a huge service network, and therefore he's skeptical of breaking up banks. Which is true--Citibank's size is the primary (and probably only) reason I'm a Citibank customer. But the unstated assumption that there must necessarily a 1:1 ratio of Too-Big-To-Fail bunches of assets to bank service networks is baffling to me. There seems to be a TBTF blind spot in the sphere of wide-area economic and financial knowledge; that is just one example. The solution is always "more regulation", or occasionally, "better regulation" with the implication that everything is the government's fault.

anigbrowl 14y ago
What's a mystery is why it is taking so long for mainstream econ and op-ed writers to catch on. I think they're quite familiar with the idea and have caught onto it long ago; they just don't want to be misrepresented as advocating a government takeover of the finance industry or as communists or whatever. It's not so much that they favor large institutions, as they're trying be moderate and consider both sides of the argument. By contrast, read the editorial pages or the comment sections of the Wall Street Journal, in which Obama is regularly characterized as a Marxist ideologue and worse, and any sort of regulation or disciplinary action against the financial services sector is characterized a shakedown, at best. If the government actually proposed carving up the banks there would be (even more) howls for his impeachment. Much as only Nixon could go to China, a reset of the financial sector could only come from some prominent Republican, and a fiscally hawkish one at that.
azernik 14y ago
An example of how large collections of assets and large service networks don't have to have a 1:1 correspondence: I'm a member of a two-branch credit union, but I get to use a fairly extensive service network through the Credit Union Service Center system, where a large number of small institutions share the customer-service side of their operations. In the SF bay area, I get full service from any of the several dozen branches of Patelco and USE, plus several smaller CUs.
qznc 14y ago
The only one who should be allowed to be too big to fail is the government itself. The logical conclusion is that everything which should be really big should be owned by the government. Then win and loss is for the society as a whole.

anigbrowl 14y ago

What's a mystery is why it is taking so long for mainstream econ and op-ed writers to catch on. I think they're quite familiar with the idea and have caught onto it long ago; they just don't want to be misrepresented as advocating a government takeover of the finance industry or as communists or whatever. It's not so much that they favor large institutions, as they're trying be moderate and consider both sides of the argument. By contrast, read the editorial pages or the comment sections of the Wall Street Journal, in which Obama is regularly characterized as a Marxist ideologue and worse, and any sort of regulation or disciplinary action against the financial services sector is characterized a shakedown, at best. If the government actually proposed carving up the banks there would be (even more) howls for his impeachment. Much as only Nixon could go to China, a reset of the financial sector could only come from some prominent Republican, and a fiscally hawkish one at that.

azernik 14y ago

An example of how large collections of assets and large service networks don't have to have a 1:1 correspondence: I'm a member of a two-branch credit union, but I get to use a fairly extensive service network through the Credit Union Service Center system, where a large number of small institutions share the customer-service side of their operations. In the SF bay area, I get full service from any of the several dozen branches of Patelco and USE, plus several smaller CUs.

qznc 14y ago

The only one who should be allowed to be too big to fail is the government itself. The logical conclusion is that everything which should be really big should be owned by the government. Then win and loss is for the society as a whole.