Break Up Big Banks? Here's a Better Solution
"Break up the big banks!"
As a rallying cry, this remains a pretty powerful one for Wall Street's harshest critics. Even among some of those who understand the banking system very well ' like former FDIC Chairwoman Sheila Bair ' it's an idea that is difficult to dismiss. Does anyone really like the idea that 70 percent of the banking system's assets are controlled by 0.2 percent of the banks in that system? Or the fact that the balance sheet of JPMorgan Chase ' the same bank that has reportedly reached a tentative $13 billion settlement with the Justice Department over bad mortgage loans sold to investors ' is about a quarter the size of the GDP of the United States?
Richard Fisher, president of the Dallas Fed, and economist Simon Johnson brought up those figures about the size of big banks last Wednesday evening as the two men argued in favor of a motion to make the country's banks less of a systemic risk by breaking them into smaller pieces. The forum for this debate was Intelligence Squared U.S., which hosts an annual series of Oxford-style debates (roughly, one every three or four weeks) over some contentious question, such as 'Abolish the Minimum Wage,' 'The U.S. Drone Program is Fatally Flawed' or 'For a Better Future, Live in a Red State.'
For my money, these debates are some of the best and most thought-provoking entertainment you can have. (And you don't need money to participate: They're available via live streaming online.) The debaters ' two on each side of the evening's question ' are usually smart, well informed, civil, on point and occasionally even acknowledge the merits of their opponents' argument. (Would that we could say the same of our elected leaders'¦.)