As we continue to wade through the financial morass primarily caused by incompetent and greedy bankers, it is particularly disturbing to note that we have not only failed to take steps to fix a broken system, but we have actually made it worse.
Our government had to pay the financial tab to rescue banks “too big to fail” for fear that if these banks went down the economy would collapse with them. In fact, in some cases the government actually forced big banks to become bigger. And a year later what do we now have? Banks really, really too big to fail. Consider the statistics….
Fifteen years ago the top five banks in the US controlled about 11% of the banking industry.
Today the top three banks control a little over 10%.
So we have reduced competition among big banks by 40% and essentially handed over a large segment of the economy to even larger more bureacratic institutions that are primarily known for their failures.
Though I recognize the need for big banks (my company needs and works with one), we should seriously question continued governmental support of a massive financial infrastructure controlled by a few – be they banks or any other huge financial institutions. Companies that do business on a national or international scale and have complex banking needs are well-served by mega-banks, but the lifeblood of small business and local economies remains with the local bank. The local community depends on local financial representation that knows the city, and the businesspeople that make the city work, as opposed to an economy ruled by policies set thousands of miles away based on factors that have nothing to do with local conditions.
But unfortunately the public, and government, have short memories. Instead of passing proper legislation and taking the right steps to prevent another economic melt-down, we have breathed a sigh of relief that it didn’t get worse, and allowed the massive financial machine that caused the mess to grow even more ominous.