Too big to fail

3 commenti (espandi tutti)


Ma quella delle Cajas spagnole non è una storia già vista?


Anche allora si trattava di banche non troppo grandi prese una per una, ma che tutte insieme crearono un discreto sconquasso.

Ci sono differenze fondamentali fra la Spagna di oggi e gli USA di un quarto di secolo fa? 

su questo, metto qui una riflessione di Rajan che si può trovare completa qui,


E' un po' lunga, ma è esattamente sul punto. 


"But another is the idea that somehow we should just make the firms themselves smaller—literally smaller—and that will prevent this from happening again. Perhaps it will make the firms less influential, if you think there are some cronyism problems. What do you make of that argument?

Rajan: You know, it’s a nice argument to put forward. I’m much less clear about how it would work practically. I’m also a little worried whether this is a knee-jerk reaction to what we’ve seen this time around. So let me start with the second point first.

One of the U.S. responses to the Great Depression, or at least the response of U.S. academics, was to point to Canada and say, no banks failed there. So at that time, the problem was there were too many small U.S. banks, they were undiversified, they all took the same risk in terms of credit risk, real estate risk, farm risk, and they collapsed. The argument then was that Canada didn’t collapse because they had these large banks that were big enough to be diversified and they had no problems. But, of course, now we’re saying, we have these large banks, and if we break them up, we will solve the problem—of course, Canada still has big banks that did not fail, but now they are an inappropriate benchmark. It seems to me that according to this line of reasoning, any structure that didn’t exist in the most recent crisis is the right one. Now we’re seeing more small banks go under, so maybe in a few months, we will absolve the large banks of blame. More sensibly, what we really need to argue about is why size may have mattered.

Clearly part of the problem is the too-big-to-fail (TBTF) issue that you worked on and pointed out in the past. And here the idea is that one way to prevent TBTF is to have small banks. But are they any safer than big banks? Having a hundred small banks exposed to the same risk may actually be riskier than having one large bank exposed to that risk. But the other problem is, when you look at the size of U.S. banks relative to U.S. corporations—when you look at capitalization, for example, the equity capital of U.S. banks has actually come down relative to U.S. firms, compared to what it was in the past.

U.S. firms have also grown big over this time. You have $400-500 billion capital companies, and the largest U.S. bank is in the region right now, with shrunken capital, of about $200 billion, if not less. So they’re not extraordinarily big in terms of equity capital. Now, you may argue leverage today is higher. I think there is some question about how you measure that leverage.

But if U.S. corporations are bigger, the risks that U.S. banks have to take in lending to a U.S. corporation are also bigger. So we should make sure that we’re comparing apples and apples when we look over time. Have the U.S. banks become unconscionably big relative to what they were? One way to look at that is concentration ratios. In the U.S., they’re not particularly high. Another way is to look at asset size relative to corporations. Again, they do not seem too big.

So, the problem may be that these banks are really, really difficult to manage once they get to some size like this. I think what we’ve seen in terms of patterns—and there’s some research emerging on this—is some banks have a history of messing up time and again, a DNA of bad management, or excessively risky management. These are also banks that make a ton of money in good times, but lose it all in bad times—so, highly volatile earnings profiles. I think there’s more value to looking closely at them to see if there are ways these “bad” banks can be discouraged from increasing their size and maybe even encouraged to shed some assets.

Feldman: You would do something targeted, based on past performance?

Rajan: I would target based on past performance, rather than make it a blanket “you can’t grow beyond this size”—though there are obvious dangers to giving regulators carte blanche to subject banks to differential treatment. I would also look at mergers with a very jaundiced eye going forward—I would ask, “What’s the benefit of having a trillion-dollar company merge with another trillion-dollar company?” If you want to grow organically, by all means do so, and as a supervisor I’ll pay attention if you grow too fast, but micromanaging what size you should be seems to me is a little limiting. I think so long as you discourage mergers of megabanks, you can get half the way to the goal of getting banks of manageable size, because banks at least for a while will be shrinking".

PS. Secondo me, RR dice alcune cose meritevoli d'attenzione. Solo, vorrei dire, l'idea che propone di basarsi sulla "past performance" è abbastanza assurda. Con questo criterio Anglo Irish sarebbe risultata fichissima e luccicante (aveva vinto anche un sacco di premi!)