Chart of the day: The big banks get bigger

By Felix Salmon
December 9, 2009
latest report, and it's pretty self-explanatory. Here's the COP's gloss:

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marketshare.tiff

This chart comes from the Congressional Oversight Panel’s latest report, and it’s pretty self-explanatory. Here’s the COP’s gloss:

Bank consolidation has worrisome implications for moral hazard, as long as there continues to be a perception in the market of an implicit guarantee. As a small number of banks acquire a larger share of the market and competition decreases, the systemic risk they pose rises.

There will be more bank failures, and many of them will end up with the failed bank getting taken over by one of the big four. Treasury has as far as I can tell no plan at all for reversing the trend in this graph, even though a good 35% of the US banking system is now undeniably too big to fail and drenched in moral hazard.

Remember too that most of the deposits in this graph don’t only have an implicit guarantee from the federal government, they also have an explicit guarantee from the FDIC, which simply doesn’t have the ability to insure sums of this magnitude. But with too-big-to-fail banks valuing that status as being worth billions of dollars, you can be sure that they’ll fight hard to prevent any attempt to shrink them. Chances are, they’ll succeed. These banks will continue to be far too big for the foreseeable future.

2 comments

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This chart illustrates Economist Michael Hudson’s contention that the world is experiencing a “once in a century transfer of wealth,” with primary recipients being the big banks and primary contributors being the vast majority of Americans.

Posted by 100yearoldman | Report as abusive

“Primary contributers INCLUDING the vast majority of Americans,” I should have said. The rest of the world’s have nots are of course contributors as well.

Posted by 100yearoldman | Report as abusive