What Would Breaking Up the Banks Even Look Like?

Sep 2013
38,779
30,747
On a hill
#1
When regulators from around the world—including the U.S. and the E.U.—determined in 2008 that the banking system was terribly under-regulated, they all suggested a similar fix: Separate the departments involved in investment banking from those that deal with more run-of-the-mill insured deposit-taking. But recently there has been some back-sliding on such separation, and finance is still dominated by giant banks that mix the two.

Yet separation makes a lot of sense. Why should to two such wildly different activities as investment banking and retail banking be bundled together in the same institution? It’s obvious what JPMorgan gains: a nice piece of ballast to offset embarrassing, high-stakes trading mishaps. But what about consumers? How does an ordinary person benefit from putting her deposit into a complex global bank? I have asked that question to experts for more than a decade and have yet to hear a satisfying answer.

Breaking up the banks in this way isn’t a proposal confined to the political fringes. Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis—as well as a former banker and a Treasury official during the brunt of the crisis—argued in a recent speech that the too-big-to-fail problem has not been solved by current regulation: The failure of more than one bank in an economic downturn would still have enormous economic costs. His suggested options include breaking up large banks, turning large banks into public utilities, and taxing leverage to reduce systemic risk. He gave short shrift to those who argue that remedies like this could be disruptive, saying, “Those potential shortcomings must be weighed against the actual risks and costs that we know exist today…Better and safer are reasons enough to act.”

Breaking Up the Banks: How to Do It - The Atlantic
 
Nov 2013
9,482
8,702
NY
#4
Google about the breakup of the big phone companies back in.. idk, the 90's ? that's what it would look like.

the separation you talk about was in place for a long time, until the Glass-Steagall act was repealed by Bill Clinton.

And the bailout deal of 2007/2008 actually created these monstrous big banks we have to deal with now, as the still "kind of" healthy banks were pretty much forced to take on the failing entities in mergers.. was like a merger giveaway, to avoid the collapse of the institutions in the worst shape.
 
Likes: 1 person
Sep 2013
38,779
30,747
On a hill
#5
Google about the breakup of the big phone companies back in.. idk, the 90's ? that's what it would look like.

the separation you talk about was in place for a long time, until the Glass-Steagall act was repealed by Bill Clinton.

And the bailout deal of 2007/2008 actually created these monstrous big banks we have to deal with now, as the still "kind of" healthy banks were pretty much forced to take on the failing entities in mergers.. was like a merger giveaway, to avoid the collapse of the institutions in the worst shape.
Amazing how Clinton repealed Glass-Steagall all by himself.
 
Likes: 1 person
Apr 2015
11,722
1,982
Banned
#6
Unless we manage to get the wild-eyed Tea Partiers out of our Congress, then the question is moot.
The too big to fail banks are bigger now than when Obama took office. Obama was the darling of Wall Street and they have gotten a huge return on all the campaign cash they sent his way.
 
Nov 2015
3,320
1,498
Cyberia
#7
The too big to fail banks are bigger now than when Obama took office. Obama was the darling of Wall Street and they have gotten a huge return on all the campaign cash they sent his way.
That means they'll be crashing the economy again real soon and threatening to crash it even more if they don't get a bailout and retainer bonus.
 
Sep 2014
4,239
1,223
South FL
#8
Different industry so you need to apply to today but see the breakup of Bell into the baby bells.
 
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