Quelle Surprise! Former JP Morgan Chairman Offers Dubious Defenses of Big Banks

Quelle Surprise! Former JP Morgan Chairman Offers Dubious Defenses of Big Banks

Ordinarily, it might not seem worth the bother to debunk yet another piece of bank propaganda. However Thursday’s op ed by former JP Morgan Chase chairman William Harrison, “Don’t Break Up the Big Banks,” recites a classic set of time-worn canards. As regulatory compliance expert Michael Crimmins said via e-mail, “It’s sounding desperate that they’re dragging Harrison out of retirement to spout this drivel.”Thus shredding this piece makes for one-stop shopping on this topic.

In classic Ministry of Truth style, Harrison depicts the critics of big banks as logically challenged:

The first fallacy is that the emergence of large, universal banks — combining commercial banking with investment banking — was an artificial or unnatural development. In 1990, there were 15,000 banks in the United States; this fragmented market meant that banks could not achieve economies of scale or easily serve clients on a national or global level.

Guess what, sport fans? Bigger banks exhibit DISECONOMIES of scale. Every study of banking ever done show that banks have a slightly positive cost curve once a certain size threshold is passed. That means that costs rise as banks get bigger. One study found the break point to be $100 million in assets, most find it to be between $1 and $5 billion in assets; I’ve seen ones that put it at $10 billion. The sort of bank Harrison is defending is vastly above that size level; JP Morgan at year end 2011 had $2.3 trillion in assets.

Rest here…

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Comments
One Response to “Quelle Surprise! Former JP Morgan Chairman Offers Dubious Defenses of Big Banks”
  1. chitown2020 says:

    The American people need a referendum on the ballot for the 2012 election to restore the U.S.C and issue our own currency through State banks. The people need to sue the Federal Reserve and abolish them. We need to start voting out the crooks beginning at the local level on up and replace them with all of us.

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