Break Up The Big Banks

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Illustration by Thomas James

Wednesday, October 16, 2013

To prevent the collapse of the global financial system in 2008, Treasury committed 245 billion in taxpayer dollars to stabilize America’s banking institutions. Today, banks that were once “too big to fail” have only grown bigger, with JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, and Goldman Sachs holding assets equal to over 50% of the U.S. economy. Were size and complexity at the root of the financial crisis, or do calls to break up the big banks ignore real benefits that only economies of scale can pass on to customers and investors?

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  • Fisher90

    For

    Richard Fisher

    President and CEO, Federal Reserve Bank of Dallas

  • Simon Johnson 90

    For

    Simon Johnson

    Professor of Entrepreneurship, MIT

  • Elliott90

    Against

    Douglas Elliott

    Fellow in Economic Studies, Brookings Institution

  • PaulSaltzman-90-px

    Against

    Paul Saltzman

    President, The Clearing House Association


    • Moderator Image

      MODERATOR

      John Donvan

      Author & Correspondent for ABC News

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Fisher90

For The Motion

Richard Fisher

President and CEO, Federal Reserve Bank of Dallas

Richard W. Fisher is the president and CEO of the Federal Reserve Bank of Dallas. In this role, Fisher serves as a member of the Federal Open Market Committee, the Federal Reserve’s principal monetary policymaking group. He is a former vice chairman of Kissinger McLarty Associates, a strategic advisory firm chaired by former Secretary of State Henry Kissinger. Fisher began his career at the private bank of Brown Brothers Harriman & Co., and later became assistant to the Secretary of the Treasury during the Carter administration, working on issues related to the dollar crisis of 1978-79. He returned to Brown Brothers to found their Texas operations in Dallas, and, in 1987, created Fisher Capital Management and a separate funds-management firm, Fisher Ewing Partners. From 1997 to 2001, Fisher was the deputy U.S. trade representative with the rank of ambassador.

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Simon Johnson 90

For The Motion

Simon Johnson

Professor of Entrepreneurship, MIT

Simon Johnson is the Ronald A. Kurtz Professor of Entrepreneurship at MIT’s Sloan School of Management. He is a senior fellow at the Peterson Institute for International Economics, a co-founder of BaselineScenario.com, a member of the Congressional Budget Office's Panel of Economic Advisers, and a member of the FDIC’s Systemic Resolution Advisory Committee. He is also a member of the private sector Systemic Risk Council founded and chaired by Sheila Bair. He is a regular contributor to The New York Times’ Economix, Project Syndicate, and Bloomberg. He is also a contributing business editor at The Huffington Post. Johnson is the co-author of 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (2011) and White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You (2013). From April 2007 through August 2008, Johnson was the chief economist at the International Monetary Fund.

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Elliott90

Against The Motion

Douglas Elliott

Fellow in Economic Studies, Brookings Institution

Douglas Elliott is a fellow in Economic Studies at the Brookings Institution. A financial institutions investment banker for two decades, principally at J.P. Morgan, he was the founder and principal researcher for the Center on Federal Financial Institutions, a think tank devoted to the analysis of federal lending and insurance activities. At Brookings, he focuses primarily on financial institutions and markets and their regulation. Elliott has researched financial institutions or worked directly with them as clients in a range of capacities, including as: an equities analyst, a credit analyst, a mergers & acquisitions specialist, a relationship officer, and a specialist in securitizations. His work has encompassed banks, insurers, funds management firms, and other financial institutions. In addition to 14 years at J.P. Morgan, Elliott worked as an investment banker with Sanford Bernstein, Sandler O’Neill, and ABN AMRO.

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PaulSaltzman-90-px

Against The Motion

Paul Saltzman

President, The Clearing House Association

Paul Saltzman is the president of The Clearing House Association and executive vice president and general counsel of The Clearing House Payments Company, the oldest and largest private sector payments operator in the U.S. Under his stewardship, the Association has emerged as the advocacy leader for the largest commercial banks in the U.S. and has been recognized for its development of a research and data-driven approach to legislative and regulatory advocacy. Saltzman has 25 years of experience in financial services, industry association management, and emerging technology development. He served as the executive VP and general counsel for the Bond Market Association (now SIFMA), the managing director and general counsel of Ellington Management Group, and executive VP and COO of eSpeed, Inc. Formerly, he was an in-house counsel for Greenwich Capital Markets and Kidder Peabody and Co., as well as an attorney specializing in structured finance at Skadden, Arps, Slate, Meagher & Flom LLP.

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Declared Winner: Against The Motion

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Voting Breakdown:
 

49% voted the same way in BOTH pre- and post-debate votes (25% voted FOR twice, 16% voted AGAINST twice, 8% voted UNDECIDED twice). 51% changed their minds (5% voted FOR then changed to AGAINST, 5% voted FOR then changed to UNDECIDED, 3% voted AGAINST then changed to FOR, 0% voted AGAINST then changed to UNDECIDED, 20% voted UNDECIDED then changed to FOR, 18% voted UNDECIDED then changed to AGAINST). Breakdown Graphic

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    19 comments

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    • Comment Link Mozell Moos Sunday, 15 June 2014 16:14 posted by Mozell Moos

      The big banks don't care about the little people :(

    • Comment Link News Time Friday, 14 February 2014 21:42 posted by News Time

      Phil Petal's Op-ed piece about this really gets at the crux of the argument. It doesn't seem like people actually have a real understanding of the effects of Big Banks. Check out thenewstime tumblr and Petal's Op-ed piece to figure out what I'm talking about

    • Comment Link Luke Fromme Wednesday, 06 November 2013 15:08 posted by Luke Fromme

      How about just taxing the Federal Reserve private banking cartel at .000666%, which would square up all our problems in short order, and keep them out of the business of playing Kings and Queens.

    • Comment Link patrick Monday, 04 November 2013 11:58 posted by patrick

      Yes, why was the question about the FED being dismantled just laughed off. They are the root cause of many if these issues, and to bring it up just results in it being ignored or treated as a joke?

      And again, as with many of these debates.... you have a point where you find out the two "opposing" sides actually agree on a lot. Can't we get some actual differing view points? Maybe a real free market supoorter? A little libertarian view to actually challenge the status quo?

      I mean seriously?! The motion lost? What a joke.

    • Comment Link Leslie King Sunday, 27 October 2013 20:00 posted by Leslie King

      I do not particularly favor large banks over small banks. I think they both have their benefits and challenges. The deciding factor should be what the economy can support without input from the government. The bailout was the real problem. Unfortunately, as big as some of these banks have become, it could, and would, have a negative impact on the national economy if these monster banks failed.
      If the government had not set a precedence of bailing out large corporations for their poor decisions (or encouraged them to make poor decisions, i.e. housing loans to high risk borrowers, etc...), then companies, and their employees, would know that if the company fails, they are out of luck. Maybe that would encourage the senior management to make better decisions.

    • Comment Link Jerry Moore Saturday, 26 October 2013 00:23 posted by Jerry Moore

      We should bring back the Glass Stegall act to prevent banks from taking risks that make lots money for the banks if they work but leaves the taxpayer on the hook if they don't.

    • Comment Link jhon Wednesday, 23 October 2013 17:28 posted by jhon

      why was the gentelman's question about breaking up the federal reserve ignored? laughed about and then ignored?

    • Comment Link George Puchta Monday, 21 October 2013 18:11 posted by George Puchta

      AND, America must have a PUBLIC BANKING SYSTEM [use the Post Office---which once was a public bank.] They work well and provide credit to ordinary people. They will provide a reasonable alternative to BIG Banks and help the average American. Add a moderate Transaction Tax on Wall Street and some well deserved prison sentences in the Financial World and America will be a different place in a decade!

    • Comment Link Norm Cimon Wednesday, 16 October 2013 23:05 posted by Norm Cimon

      My question in this context: The development of automated markets, and the use of computerized trading have turned banking into an enormous ecosystem. That ecosystem is subject to large non-linear forces, enough feedback to collapse different trophic levels. Such a collapse can then cascade throughout the system and bring the house down.

      What role have the large banks played in amplifying that feedback with their trading operations, how dangerous is that role, and should it be considered as part of the argument for breaking them up?

    • Comment Link Vince Wednesday, 16 October 2013 13:19 posted by Vince

      Why don't I hear anyone talking about banning ALL banks from being publicly traded? This would effectively provide disincentives for banks to expand rapidly as they do now. With this solution, economies of scale may be compromised, but at least it will eliminate systemic risks due to the creation of smaller banks, each with disparate functions.

    • Comment Link Mike Rhodes Tuesday, 15 October 2013 13:21 posted by Mike Rhodes

      Question for the 'against' panelists: The Federal Reserve has dramatically expanded its balance sheet, standing today at $3.8 trillion. The increased holdings are largely excess reserves of 'bailed out' banks. Some of the assets are undoubtedly of questionable value. My question: Which market force prevents the Federal balance sheet from being used as a 'toxic waste dump' again in response to the next industry crisis? Thank you for the debate.

    • Comment Link Anish Monday, 14 October 2013 15:57 posted by Anish

      I never really understood the point of having large banks, who do they really benefit?

    • Comment Link Martin Friday, 04 October 2013 19:51 posted by Martin

      Please tell me... as a concerned individual and certified general property appraiser, why should I buy a ticket to this debate?

    • Comment Link Mark Sunday, 29 September 2013 04:41 posted by Mark

      Why isn't Yaron Brook in this debate?

    • Comment Link Sterling Wednesday, 25 September 2013 16:26 posted by Sterling

      The correct option is not given as an option. The proper option is to stop the government from manipulating the economy, stop them from bailing out banks, stop them from handing out favors to their friends, stop them from "stimulating" the economy by creating money and injecting it into the economy in the direction of these big banks.

      Currently, the government gives special favors to these banks. This is the reason they are so large. The "for the motion" description wants the government to flex its power and forcefully break up institutions. Both are options in favor of large and powerful government. The solution is less government, less special favors, less manipulation of currency. An option that was not provided.

    • Comment Link Casperius Maximus. Friday, 20 September 2013 04:35 posted by Casperius Maximus.

      All this controversy over the big banks, my question is, where is all of AMERICA'S money going? Bailing out industries is like giving the 1% a free pass to a middle school degenerate who blows out the bathroom plumbing with a cherry bomb. "That's ok Timmy. Better luck next time. Don't worry, the janitor will take care of it."

      How did the auto industry, the housing industry, the banking industry, all fall into disturbing disrepair? The sad fact is that corruption is everywhere. people are so worried about getting their own, they stick the next man in line with the ticket. All those "higher than the clouds" financial institutions are welcome to stand on their own, unlatched from the governments resources. The truth, the banks and the government manufactured the recession, the bail-outs, all of it. To keep the introduction of a definite caste system rolling smoothly until we just stop wondering what the government is spending our money on, and why our lives aren't benefiting from their course, but degrading instead in the quality of services provided.

    • Comment Link Norman Day Thursday, 19 September 2013 19:48 posted by Norman Day

      allow the banks to become as big as they want
      INCREASE CORPORATE TAXES ACCORDINGLY
      Thy wil stop expanding when it becomes
      uneconomical.

    • Comment Link randy Thursday, 19 September 2013 15:11 posted by randy

      The big banks played their game, and came out with a safety net provided by the government...Which has no business in the private sector..a lot of political crap came into play here,and now the big banks know they can continue their practices with another bailout if they yell loud enough.. the rich get richer. The bailout should have never happened...

    • Comment Link Halsey roberts Wednesday, 18 September 2013 15:18 posted by Halsey roberts

      There is no clear economic benefit having them being this size. It only adds systemic risk and exposes the taxpayers to another bailout.

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