Reckless Behavior

I believe the notion of “Too big to fail” still exists today. As we have learned from the recession and the fall of Lehman Brothers, the few major banks have a colossal affect on the economy.  Due to the massive amount of power these banks possess, it is imperative to keep the financial system sound and resilient, even if this means government intervention. The influence these banks have is very far stretching, reaching areas beyond Wall St. For example in the video it reveals due to the Lehman Brother’s struggle, there were catastrophic consequences in European banks and even GE was having trouble funding their day-to-day operations.

The government tried to prove a point to these major banks when it refused to bail out Lehman Brothers. Instead of using government money, there was a push to get other bigger banks to step up and help. I found this scene very thought provoking when the CEOs from all the banks met to try to find a solution. The film reveals the way these big banks are intertwined. For example Merrill Lynch knew they would be the next to go if Lehman Brothers died.

Michael Snyder’s article, “Too Big To Fail Is Now Bigger Than Ever Before,” reveals the amount the banks have grown since the financial crisis. Big banks are gaining more power and putting smaller banks out of business. The six largest banks, JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and Well Fargo, have grown 37% in the last five years and control 67% of U.S.’s banking assets. We saw the affects of these large banks’ recklessness in 2008, and due to their growth, the negative consequences would be even larger today.  These enormous banks basically control our economy and staff over a million people. I agree Wall St. has a gambling problem and if this problem becomes too big and we face another possibility of what happened in 2008, it is crucial for the government to address these problems. At times it seems these banks feel invincible due to their power.


6 comments on “Reckless Behavior

  1. I really agree with the ideas you presented in this post. These institutions have been allowed to grow to large and powerful. The global economy has to play puppet to every tug of these corporations and that should not be the case. The notion of free market is essentially thrown out of the window because tax payers’ survival is tied to the success of certain companies.

    • I’m glad you make the point about the “free” market. While our economic system may not strictly adhere to the definition of a free market (due to regulation), but I think that it is important that all firms have the capacity to fail. This ability to fail keeps the firm making more conservative decisions.

  2. Are these banks invincible though? As you state, they control 67% of the US’s bank assets, the US government can never let the fully fall or else the US as a whole would fall and as you mentioned, our economic fallings would have a domino affect on other countries. So is it wrong for them (these top banks) to believe they are invincible?

    • I think it is wrong because it gives them the leverage to take large risks that they else wouldn’t have. If they know that no matter what they do the economy of the U.S and global market depends on their survival, there is this cushion that the government is not going to let them sink.

      • I agree with Kamal. I think the fact these banks control so much of the US’s bank assets gives them a sense of control and comfort. If these banks ever got themselves into a situation like 2008 they would feel confident that the government would HAVE to bail them out, because they control so much that the national and possible global financial system would collapse. These banks need to be held responsible for their actions and unfortunately there is no way to hold them accountable because they are so powerful

  3. Your final assessment seems pretty accurate. 67% of banking in 6 firms.

    While they are more capitalized then in 2001-2008, we seem to have jumped from a great recession into an oligopoly.

    I am not resigned about it. I am angry and looking for real solutions, not holding our fingers till it happens again.

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