Breaking (Banks) Up Is Hard To Do: New Perspective on "Too Big To Fail"

Big is bad. At least that has become the view of many individuals about big banks ever since the financial crisis of 2007-2009. The fear is that if a big bank gets into trouble, its problems will infect other financial institutions and threaten the entire economy, and this fear prompted bank bailout...

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Bibliographic Details
Published in:Policy File 2013
Main Authors: Barth, James R, Prabha, Apanard (Penny) Angkinand
Format: Report
Language:English
Subjects:
Banking/Finance
The Milken Institute
Online Access:Request full text
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Summary:Big is bad. At least that has become the view of many individuals about big banks ever since the financial crisis of 2007-2009. The fear is that if a big bank gets into trouble, its problems will infect other financial institutions and threaten the entire economy, and this fear prompted bank bailouts, both in the U.S. and abroad. In the wake of that experience, regulators and banking experts almost unanimously agree that regulatory reform is essential to ensuring that no bank is ever again too big to fail. Unfortunately, there is far less agreement about the best approach for ending too big to fail. As a result, a number of prominent bank regulators and industry experts recommend a more drastic change: simply breaking up the biggest banks.