Bank Breakup 101

Wednesday, April 21, 2010

Some organizations are calling for the government to break up the big banks.  If that were to happen, what would it look like? Simon Johnson, the former chief economist of the International Monetary Fund, a professor at the MIT Sloan School of Management and a co-founder of The Baseline Scenario blog, weighs in. His new book is 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown.

Comments [3]

Chris from East Side

Dr. Johnson:
How would a restoration of Glass-Steagall fix to-big-to-fail? Couldn't even a separate investment bank -- even one with no leverage -- still become so large that its failure poses a systemic risk?

Apr. 21 2010 10:42 AM

Paul Krugman argues that it's not the size of the organization that poses a threat to the economy. Instead, he says that it's the activities those organizations are involved in that should be of concern. I agree; we need to stop obsessing on the size of banks -- big economies require big banks. However, we do need a regulatory scheme that keeps financial market activity from getting out of hand.

btw... Simon Johnson will probably be in need of a bail-out once this financial crisis has blown over.

Apr. 21 2010 10:41 AM

If defenses of the present system was truly broken down so that its sole integrity was not the fearful preservation of status quo, imagine all the great, creative minds who would be drawn from the internet and other realms of innovation to the world of banking.

I'd be most curious to see today's soulless math wizards replaced with dot com social networking userability nerds! Not to mention historians, teachers, scientists and all those folks with horse sense.

Apr. 21 2010 10:39 AM

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