![]() ![]() “…We show two (potentially interconnected) results: first, policymakers are substantially more likely to rescue top-5 banks on the verge of failure, and, second, large banks have more stable funding dynamics in crises, despite greater equity losses. So why would federal regulators allow these imprudent banking behemoths to grow even larger during a crisis? The authors write: Large banks typically take more, not less, risk than smaller banks in the run-up to crises, and large banks suffer bigger equity losses and contract their lending more in the aftermath of crises.” Our second finding is that the opposite is true. “One may ask whether ‘survival of the biggest’ is due to more prudent behavior of the large banks in the run-up to crises. (Bank of America was allowed to buy Merrill Lynch during the financial crisis in 2008 and Wells Fargo was allowed to buy Wachovia Bank during the crisis.)Īnother key finding from the new study also buttresses the findings of the Financial Crisis Inquiry Commission following the financial collapse of 2008 in the U.S. ![]() creating the worst financial collapse since the Great Depression in 2008, federal regulators handed the same problem banks more assets during the 2008 financial crises. UNFORTUNATELY, AS YOU ARE ABOUT TO SEE, THESE ARE JUST THE WARNING SIGNS OF THE TERRIBLE CATASTROPHE HEADING OUR WAY.ĭespite mega banks in the U.S. ![]() THE PANDEMIC, RIOTING, AND VIOLENCE ON OUR STREETS, SKYROCKETING FOOD AND GAS PRICES, AND EVEN THE THREAT OF NUCLEAR WAR… WE’VE ALL BEEN THROUGH SO MUCH SUFFERING AND MISERY LATELY… Wells Fargo has grown by $1.2 trillion since the financial crisis. Bank of America has grown by almost $1 trillion in assets since 2010. As our chart below shows, JPMorgan Chase has more than doubled in size since 2010 to $3.38 trillion in assets as of June 30. Department of Justice between 20 and developed a rap sheet rivaling an organized crime family but that didn’t stop its federal regulators from handing it First Republic Bank and its approximately $200 billion in assets after First Republic failed this past spring. JPMorgan Chase went on to admit to an unprecedented five felony counts brought by the U.S. During the 2008 crisis, federal regulators allowed JPMorgan Chase to buy Bear Stearns and Washington Mutual as they collapsed. The largest bank holding company by assets in 2008 was JPMorgan Chase. Let’s pause here for a moment and examine that finding in relation to what happened during the financial crisis of 2008 in the United States and this past spring. We call this repeated pattern during crises the ‘survival of the biggest.’ We show that the aftermath of banking crises can account for 40% of the total increase in top-5 banks’ asset share across history.” As a consequence, the market share of large banks tends to grow in crises, making them even more dominant going forward. Smaller banks also tend to be absorbed at high rates by large banks in the aftermath of crises. “First, we find that large banks are substantially less likely to fail in banking crises than smaller banks. Other key findings from the study include the following: The 150-year banking study is titled: “ Survival of the Biggest: Large Banks and Financial Crises.” Its authors are Matthew Baron of Cornell University Moritz Schularick of the Kiel Institute for the World Economy and Sciences and Kaspar Zimmermann of the Leibniz Institute for Financial Research SAFE. ![]() The bank balance sheets of the following countries were examined: Australia, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, and the United States. And in every country, the study arrived at the same finding: concentrating the banking system in the hands of five or less giant banks leads to financial instability and more severe financial crises. It took eight years of research to compile a data set of annual balance sheets of more than 11,000 commercial banks dating back to 1870 in 17 advanced economies. ![]()
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