Feature

In defense of the big banks

The argument for breaking up big banks may be “simple and sound-bite-ready,” but every part of it is “based on a fallacy.”

William B. Harrison Jr.The New York Times

The argument for breaking up big banks may be “simple and sound-bite-ready,” said William B. Harrison Jr., the former head of JPMorgan Chase, but every part of it is “based on a fallacy.” Critics say there was something unnatural about combining commercial and investment banking to create universal banks over the past decade. In fact, bank consolidation “was driven by the market’s needs” and has provided far greater efficiency to customers. In the financial crisis, remember, “none of the first institutions to fail”-—Countrywide Financial, Bear Stearns, Lehman Brothers-—were universal banks. Nor are large institutions too risky and complex: It’s mostly smaller firms like MF Global and Knight Capital that have spectacularly failed to manage risk. Actually, “complexity can be an antidote to risk,” since a large bank’s diversified activities help cushion it against losses in any one division. It’s also “just false” to say that banks have undue political power; regulators make independent judgments all the time. By fostering “more innovation, greater convenience, and consistent, reliable service,” large banks give the U.S. a competitive edge it “can’t afford to lose.”

Recommended

Germany's center-left Social Democrats narrowly beat Merkel's bloc
Olaf Scholz
Germany votes

Germany's center-left Social Democrats narrowly beat Merkel's bloc

San Marino residents vote overwhelmingly to legalize abortion
A nun votes in San Marino.
referendums

San Marino residents vote overwhelmingly to legalize abortion

Switzerland votes to make same-sex marriage legal
Supporters of same-sex marriage celebrate in Switzerland.
it's about time

Switzerland votes to make same-sex marriage legal

Initial German exit polls show startlingly close race
German election.
neck-and-neck

Initial German exit polls show startlingly close race

Most Popular

Jimmy Fallon and Nicole Kidman almost make it through interview without awkwardness
Jimmy Fallon and Nicole Kidman
Last Night on Late Night

Jimmy Fallon and Nicole Kidman almost make it through interview without awkwardness

7 cartoons about America's vaccine fights
Editorial Cartoon.
Feature

7 cartoons about America's vaccine fights

Democrats are governing like Republicans
A donkey.
Picture of W. James Antle IIIW. James Antle III

Democrats are governing like Republicans