Sheila Bair's New Op-Ed: Why Now Is The Time To Break Up The 'Too Big To Fail' Banks
By former FDIC Chair Sheila Bair
Customers would benefit, the U.S. government would benefit, and - believe it or not - the big banks themselves would do better.
FORTUNE -- America is downsizing. Whether it's the food we eat, the cars we drive, or the houses we live in, Americans are concluding that smaller is better. Even U.S. corporations are starting to see the benefit of more Lilliputian institutions; the impending --and widely hailed -- breakups of McGraw-Hill and Kraft are two examples.
So what about banks? It would surely be in the government's interest to downsize megabanks. Sen. Sherrod Brown (D-Ohio) continues to push his bill to split apart the largest institutions. Regulators have new authority to order divestitures under the Dodd-Frank financial reform law. From a shareholder standpoint, government breakups have a pretty good outcome. It worked out well for John D. Rockefeller, whose shares in Standard Oil doubled after it was ordered to break up. Ditto for those who owned stock in AT&T.
Yet with gridlock in Washington, don't count on politicians for a solution. Shareholders, however, have an interest in demanding that big banks split apart. Comparing the valuation for the supersize banks Citigroup, Bank of America (BAC), and J.P. Morgan Chase (JPM)) with their simpler, leaner competitors isn't pretty.
Jan 20, 2012 at 1:21 PM
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