Friday, May 8, 2009
"Economics of scale for banks are exhausted well before a balance sheet size of $100bn is achieved. Synergies between commerical banking and investment banking activities are essentially non-existent. ... Chinese walls in banks, auditing companies, rating agencies and other financial enterprises don't stop any information that is commerically profitable from getting across the boundaries. ... There is no 'too-interconnected-to-fail' problem separate from the 'too-big-to-fail' problem. If I operate on a small scale, I and my interconnections are immaterial from a systemic stability perspective. ... The second reason is that financial supermarkets can shelter non-systematically important profitable operations under the heavily subsidised public umbrella provided by the state to a few systematically important operations (deposit-taking, payment, clearing and settlement systems, counterparty and custodial services) through lender of last resort support", William Buiter at the FT, 17 April 2009.
I agree with Buiter. Bust up the banks.