Will Big Banks Really Be Broken Up Into Bits and Pieces?
November 12, 2009
Not sure if you've been following the latest bank hearings--there have been so many of them over the past year, who could begrudge you for missing out--but these bank hearings may be bigger than most.
The Senate is dicussing what to do about the "too big to fail" big banks and too big other companies that act like banks, such as insurance companies.
Apparently, if Bloomberg's exclusive report is to be believed, the Senate may actually pass a law that results in the breaking up of several big banks.
John Reed, the former CEO who started Citigroup towards being too big to fail, has even apologized to Congress for using that strategy.
Could big banks such as Citigroup really be broken up?
Populist conspiracy theorists would suggest no, that the Wall Street types would never give up access to the savings accounts and CDs and money market accounts of millions of people.
But what if conservative investments such as savings accounts and CDs were, somehow, segregated by law from speculative investments such as, say, betting on the value of copper on November 13, 2009.
For that is, essentially, what modern giant banks do: use deposit accounts to fund other aspects of the operation.
Previously, circa September of 2008, this system worked fantastically, and it is even working not bad right now, if impressive bank earnings are to be believed.
Could this system, this idea that banks should not only hold money but actively invest it, actually be on the verge of being dismantled?
If so, is that a good thing?
Or will it simply mean that the real business of banking moves the rest of the way off-shore?
Shorebreak
13 November 2009 at 10:38 am
This will never happen. The large Wall Street banks own too many politicians from the top to bottom for even any suggestion of breaking them up to get out of committee. If Congress is unable to reinstate the Glass-Steagall Act how does one expect them to break-up the banks?