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Not Too Big Enough

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  • How the “too-big-to-fail” banks got that way, and why the current banking reform won’t solve the problem.
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  • US Financial Reform Bill Misses the Mark
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  • Standing Up to the Unholy Alliance Between Washington and Wall Street
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Rob Larson, Dollars & Sense

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The government bailout of America’s biggest banks set off a tornado of public anger and confusion. With a price tag in the trillions of dollars, rescuing the biggest American banks has left the public resentful over the bailout of banks considered “too big to fail.” But two years later, the Senate has rejected a proposal to break up today’s “megabanks” into smaller institutions, claiming that tougher reserve requirements and higher insurance premiums will prevent future large-scale bank failures.

Dealing with the collapse of these “systemically important banks” is a difficult policy issue, but the less-discussed issue is how the banking industry got to this point. If the collapse of just one of our $100 billion megabanks, Lehman Brothers, was enough to touch off an intense contraction in the supply of essential credit, we need to know how some banks became “too big to fail” in the first place. The answer lies in certain incentives for bank growth, which after the loosening of crucial industry regulations drove the enormous waves of bank mergers in the last thirty years.

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More...

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Related:

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US Financial Reform Bill Misses the Mark,  Billy Wharton, Examiner.com
The new regulations will do little to curb the activities of the mega-financial institutions at the center of the economic crisis that ensued in 2008.

Standing Up to the Unholy Alliance Between Washington and Wall Street, Sen. Russ Feingold (D-WI), Huffington Post

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  • Dead On Arrival: Financial Reform Fails
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  • Baker Says Regulatory Overhaul Won't `Change the System'
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