During the Bank Crisis last year was occuring a phrase often heard was "too big to fail". Meaning a bank was too big to let fail and that it would have a ripple effect in the economy if we let it. As the pie-chart above show, unfortunately the crisis made it worse. There are less banks, and the banks that are left are even bigger. What happens now if one of them or many of them are about to fail? Now it's even harder to let them fail.
This is bad. Capitalism is balanced by risk. Businesses need to evaluate risk and balance them with possible positives. Unfortunately, with banks as large as they are now, the risk to them is even less. Why? Because if they take on too much risk and run into trouble, it's hard for the government to let them go for fear of damage to the rest of the economy. Without that fear of failure, the banks can take on even riskier prospects and increase their chances of running into problems without severe consequences.
Whether or not they consciously think about it or not, in the back of their minds now is the thought that if they run into too much trouble, the government will probably ride in and save them. Large benefit, low risk.
In terms of consumers and customers, they will also see these banks as a safer place to do business and put their money, because they perceive them as having their backs covered by the government, thus making them larger and hurting their competition.
I'm not saying none of the banks should have been bailed out, the threat to the economy overall was great, but something now needs to be done about this. This is not capitalism, this is dangerous. Risk needs to be assigned back to the banks, and competition between all banks needs to occur.
The Big 4's marketshare is too big, even for their own good.
Too Bigger to Fail Part 1Popularity: 1% [?]
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