Getting Bigger and Bigger

First I wanted to say that I have wanted to watch the movie “Too Big to Fail” for a while now, so I was happy to see that it was the topic of our blog post. Back in 2008, major banks and insurance companies AIG were considered “too big to fail.”  Since 2008, these firms have only become bigger with the Bank of America-Merrill Lynch, JP Morgan Chase-Bear Sterns, and Wells Fargo-Wachovia acquisitions. To me, obviously if they were considered too big to fail then, there are certainly still too big to fail now. In the film, Timothy Geithner explained to Hank Paulson that an option to save some of these banks is to work out an acquisition deal between two of them. Hank looked at him puzzled and said something along the lines of “you want to make the banks that we have considered too big to fail even bigger?” It is counterintuitive, but given the situation it was the best move. Although they are bigger, added regulation will help to oversee that the banks are working ethically. So even though the banks are getting bigger and bigger, they can be more easily monitored. With the added regulation, it would be almost impossible for a company to put itself into a position to fail.

Although the notion of too big to fail still exists today, it is definitely not as concerning to me presently because of the added regulation. The companies that are too big to fail are closely monitored and would be unable to fall into the same situation as 2008. The only thing that I worry about, that hopefully won’t happen in my lifetime, is that the same cycle of deregulation and corporate greed will occur.


4 comments on “Getting Bigger and Bigger

  1. The prevalence of acquisitions in the banking industry has prevented many banks from completely failing. The scene in the film when all the CEOs met to discuss what they could and should do to help Lehman Brothers, and ultimately the economy was intriguing. These banks are well aware of their power and the effect they have on the economy. Although they are competitors, at times they are willing to work together to save the economy.

    • I honestly do not know if they are willing to work together to save the economy so much as themselves. It took a very long time for any of them to accept any help because it made them look bad. Even when Warren Buffet offered a decent price to save Lehman, the CEO was only looking for enough to benefit himself. It took days of persuasion to get the CEOs to agree and even so, it was somewhat forced upon them – not a decision they all made together. They are aware of their power and want to keep it.

  2. I agree, regulation is the main factor here that cannot be overlooked. Pure mass is not the issue at hand, banks feeling impenetrable with no one checking how ethically they work is the problem. I also hope we never see that same cycle during our lifetimes.

  3. I am not confident at all that the Dodd-Frank changes fixed the problems. We’ll read more about that in a week or two.

    One of the main reasons is that we did not do enough to control the integration retail and commercial banking. I have yet to see the evidence this chimera of deregulation helped in meaningful ways.

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