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Break Up The Big Banks

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  • Do Banks Stabilize or Spread Crisis

    Clip: Richard Fisher contests the claim that the banks stabilized the financial crisis a position taken by Paul Saltzman who cites big banks that absorbed smaller failing institutions.

  • Let the Market Enforce a Breakup of the Banks

    Clip: Richard Fisher and Simon Johnson argue that with the right rules set up by government market forces will break up the big banks so that they are not at risk of needing bailouts from taxpayers.

  • Can Large Banks Be Successfully Resolved Under Current Law?

    Douglas Elliott and Paul Saltzman argue that current law can successfully resolve banks deemed 'too big to fail' while Richard Fisher and Simon Johnson disagree and propose additional legal measures.

Debate Details

To prevent the collapse of the global financial system in 2008, the Treasury committed 245 billion taxpayer dollars to stabilize America’s banking institutions. Today, banks that were once “too big to fail” have only grown bigger, with JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, and Goldman Sachs holding assets equal to over 50% of the U.S. economy. Were size and complexity at the root of the financial crisis, or do calls to break up the big banks ignore real benefits that only economies of scale can pass on to customers and investors?

The Debaters

For the motion

Richard Fisher

President and CEO, Federal Reserve Bank of Dallas

Richard W. Fisher is the president and CEO of the Federal Reserve Bank of Dallas. In this role, Fisher serves as a member of the Federal Open Market... Read More

Simon Johnson

Fmr. Chief Economist, International Monetary Fund

Simon Johnson, former chief economist of the International Monetary Fund, is the Ronald A. Kurtz Professor of Entrepreneurship at the MIT Sloan... Read More

Against the motion

Douglas Elliott

Fellow in Economic Studies, Brookings Institution

Douglas Elliott is a fellow in Economic Studies at the Brookings Institution. A financial institutions investment banker for two decades, principally... Read More

Paul Saltzman

President, The Clearing House Association

Paul Saltzman is the president of The Clearing House Association and executive vice president and general counsel of The Clearing House Payments Company... Read More

Where Do You Stand?

For The Motion
  • Five banks comprise over half the U.S. financial system, a systemic risk to the economy that threatens to destabilize the entire country.
  • When they are perceived to be too big to fail, banks benefit from an implicit government subsidy that allows them to engage in risky behavior.
  • The big banks are too complex to manage, making internal and external governance ineffective.
  • Mega-institutions disproportionately affect public policy due to their size and lobbying power.
Against The Motion
  • Dramatically restructuring big banks would disrupt the financial system and economic growth, and result in unintended consequences.
  • Consumers benefit from the economies of scale that big banks can provide.
  • A bank's size does not necessarily indicate systemic importance, and size restrictions would be completely arbitrary.
  • The big banks were not the primary cause of the financial crisis. The first institutions to fail were not the big universal banks, but institutions like Bear Stearns, Fannie and Freddie, Lehman Brothers, Countrywide, AIG.

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The Research

The Research

The Dodd-Frank Act

Steven Markovich
September 13, 2013

Proponents contend its major provisions--monitoring systemic risk, limiting bank proprietary trading (the ‘Volcker rule’), placing new regulations on derivatives, and protecting consumers--will help prevent another financial crisis. Detractors, including many Republicans and Wall Street executives, argue that the reforms will imperil future economic growth by over-constraining the financial system.

In Defense of Big Banks

William Harrison
August 22, 2012

Breaking up some big banks would hurt their customers, clients and the broader economy. It would actually inject new risks into the financial system.

The Case for Breaking Up the Big Banks

Mark Thoma
November 20, 2012

We have paid too little attention to the growing economic and political power of our largest firms, and this concern is not limited to the financial sector.

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