Posts Tagged ‘martin wolf’

Stats of the day

7 April 2009

64%

= percent of U.S. bank assets controlled by the four largest commercial banks (JPMorgan Chase, Citigroup, Bank of America, Wells Fargo; source: Martin Wolf in the FT).  That four-firm concentration ratio is up sharply from 39% in Feb. 2003 (source: Frederic Mishkin’s money and banking textbook, ~2004 edition).

$2.7 million

= money received by Obama chief economist Larry Summers for 40 speaking appearances before bailout-receiving Wall Street financial institutions in 2008.   Now, Summers is a brilliant man with lots of policy experience to share, but how likely is it that these cash-strapped firms were paying just for his insights and not even trying to buy access to Obama’s top economic adviser?  The White House would have us believe that access had nothing to do with it:

‘A White House spokesman, Ben LaBolt, said the compensation was not a conflict for Mr. Summers, adding it was not surprising because he was “widely recognized as one of the country’s most distinguished economists.”’

Some have already called for breaking up the biggest financial institutions, to the point where none of the ones remaining are “too big to fail,” and then letting market discipline or effective regulation keep them in line.  All well and good, but these stats, especially the last two, recall the original 19th century rationale for antitrust action:  The biggest firms just have too much political power.  Small is not only beautiful, but small firms are less likely to be writing the laws of the land.

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Big zombies

12 February 2009

Must . . . eat . . . money

(hat tip: Julia)

Many economists have been warning that the net-worth problems of the banks are a lot bigger than the $700 billion that’s been allocated to deal with them.  Some have said a TARP II, TARP III, etc., to the tune of $2 trillion or so may be necessary to fix the banks once and for all.  Now Dr. Doom himself, Nouriel Roubini, says the banking system is just plain insolvent, and by about $3.6 trillion.  The specter of 1990s-Japan-style zombie banks in the U.S. is no longer a specter but a reality, it seems.

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