How big are the big banks?

| March 1, 2010 | 1 Reply

At The New Republic, Simon Johnson and Peter Boone offer some eye-popping numbers to illustrate how big the big banks have gotten:

As a result of the crisis and various government rescue efforts, the largest six banks in our economy now have total assets in excess of 63 percent of GDP (based on the latest available data). This is a significant increase from even 2006, when the same banks’ assets were around 55 percent of GDP, and a complete transformation compared with the situation in the United States just 15 years ago, when the six largest banks had combined assets of only around 17 percent of GDP. If the status quo persists, we are set up for another round of the boom-bailout-bust cycle that the head of financial stability at the Bank of England now terms a “doom loop.”

From the same article, here’s more numbers to illustrate how big is big:

The big four have half of the market for mortgages and two-thirds of the market for credit cards. Five banks have over 95 percent of the market for over-the-counter derivatives. Three U.S. banks have over 40 percent of the global market for stock underwriting. This degree of market power brings with it not just antitrust concerns, which this administration has declined to act on, and a huge amount of economic risk–but great political influence as well. The banks are going to use that power to block legislation containing any meaningful financial reform. And they are likely to succeed.

Can we simply regulate banks? More bad news:

The idea that we can simply regulate huge banks more effectively assumes that regulators will have the incentive to do so, despite everything we know about regulatory capture and political constraints on regulation.

In their conclusion, the authors are not optimistic that the Obama White House has the will to push meaningful reform.

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Category: Economy

About the Author ()

Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich and his wife, Anne Jay, live in the Shaw Neighborhood of St. Louis, Missouri, where they are raising their two extraordinary daughters.

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  1. Erich Vieth says:

    From Bloomberg:

    Federal Reserve Bank of Dallas President Richard Fisher called for an international pact to break up banks whose collapse would threaten the financial system, a position that goes beyond other Fed officials . . .

    “Given the danger these institutions pose to spreading debilitating viruses throughout the financial world, my preference is for a more prophylactic approach: an international accord to break up these institutions into ones of more manageable size,” Fisher, 60, said in prepared remarks. “If we have to do this unilaterally, we should.”

    http://www.bloomberg.com/apps/news?pid=20601087&s

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