A Problem Too Big To Solve


Although the concept of “too big to fail” was clearly seen in the financial crisis of 2008, I believe it still exists today.  In fact, “too big to fail” is probably an even bigger concern now because of the rapid growing of the few largest banks in the United States. This is an issue because banks are able to get away with risky behaviors since they know that they won’t be allowed to fail. We haven’t learned from our past failures. Instead of the government finding ways to fix this problem, it seems to be getting worse. We can’t deny that these major banks are at the center of our economy and that we need them to be in business in order for our economy to function properly.

The major banks in the United States take up a large percentage of the economy as a whole. For this reason, it is impossible to let one of these large banks collapse, because the economy would then collapse as well. Since these banks are only getting larger, the problem persists. Just as it is common for the rich to get richer and the poor to get poorer, the major banks are gaining more and more control of the United States economy, while smaller banks are being pushed out. The distribution of the economy as a whole is getting less and less. The government has no chance but to step in in the event of a crisis, because without their help, the economy would turn to disaster. Where does this end? A solution is needed in order to take the risk out of our economy. So much of our society is dependent on our large banks and it is likely that they will keep getting larger. The question becomes, should we implement policies to force these banks to downsize, or should we let them go and risk the possibility of the government having to provide bailouts?

Advertisements

One comment on “A Problem Too Big To Solve

  1. I have two schools of thought in regards to your questions. The first is that downsizing would help if more smaller banks emerged. While that does not seem feasible, it would spread American assets thinner and introduce less risk. The second is that there could be even fewer banks creating less competition and less chance for failure. With less risk of falling to competitors, investments would possibly be safer. If the banks focus more on the customers and less on trying to match earnings, it could a more productive and sounder bank.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s