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Comment by kerno | Hacker News Reader

It depends on what "breaking up the banks" means.

If we just mean to break them up into smaller banks, it is hard to say whether negating the benefits of scale will raise costs higher than the competitive pressure of no longer having dominant institutions effectively being able to set prices.

If we mean to break up securities trading and deposit-taking divisions into separate institutions (as Glass-Stegall was meant to enforce until repealed) then we may see a return to a more stable Wall Street, as the house would be forced to play it's own money instead of yours, and 'banking' will be pure and boring again.

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There's evidence that bigger and bigger banks don't achieve more efficiency: http://www.washingtonsblog.com/2009/10/big-banks-are-not-mor...

There is also that the largest banks have the implicit support of the federal government, and therefore have an artificially low cost of capital relative to smaller banks (because the Feds will prevent a default). That benefits someone somehow, although it can be hard to figure out who.

This, for me, is ultimately the major reason that private banking institutions, as they are currently formed, must be changed.

The implicit and even explicit backing of a government of a private institution, forced as a result of that bank's size and market impact, allows that institution to take larger risks and to privatise profits that are generated as a result of the public's support.

This is a major unintended consequence of saving big banks during the financial crisis.

yep, privatized profit, but socialized losses.

Not all that hard to figure out who:

http://www.theatlanticwire.com/business/2013/02/banker-bonus...

It is interesting to see that banks' employees and not, say, their shareholders are able to extract the benefit.

That's kind of how banks work, too big to fail or not. You don't see the same thing happening at GM, for example, who also benefits from governmentally subsidized cost of capital.

It benefits the top management of the big banks. (In theory, the stockholders benefit too if they let more of the profits trickle down to the stockholders.) They will take more risks than they otherwise would. They figure that if the risk pays off, they become richer. If the risk does not pay off, they don't have to worry about losing anything (?everything?) financially because the Feds will bail them out.

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