U.S. Banks

Obama is trying to split American banks into smaller lower risk enterties. And the stock market has responded. Is this a good or bad action by the president?



Johny.

 

Doesn't appear to be good for our market so far....

 

I think it's a reasonable decision, though that said having smaller financial institutions won't prevent credit bubbles and contractions if the way the financial system operates isn't changed.

The financial system is such a critical element of any economy, far to critical for it to be overly centralised and it's also far to critical to be left to the incompetence and abuse of government.

Personally I think the financial industry should be operated as a highly regulated, not for profit industry. The idea of having smaller for profit institutions still leaves society exposed to the adverse selection and moral hazard with institutions that are often incentivised to maximise profit at the expense of social welfare.