Small is Beautiful? Maybe. But Big is Bad.

March 28th, 2009

At least this headline holds true for banks. Steve Randy Waldman, as so often, gives us cogency–in this case on why big banks are a problem. My favorite part (and my emphasis):

Scale breeds agency problems. Earning an extra five basis points on $100B in assets amounts to $50M in extra income a year, a fraction of which can make a manager very wealthy in an eat-what-you-kill bank. Making that same five basis points on a $100M portfolio earns a small bank 50K, a fraction of which amounts to a nice bonus, but not a lifestyle change.

For both managers, the downside if something goes wrong is the same: they lose their jobs.

For the managers, big is good. For the rest of us, not so much.

Related posts:

  1. Mankiw’s Right: Money’s Not the Incentive
  2. “Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity Is Not Expensive”
  3. Does Unemployment Insurance Make People Lazy?
  4. Why The Fed Hates Inflation More Than It Hates Unemployment
  5. Warren Buffett: Estate Tax Good
  1. replicas handbag
    March 31st, 2012 at 04:09 | #1
    Reply | Quote

    comment6, buycialisprof.com, [url=”http://buycialisprof.com”]buycialisprof.com[/url], http://buycialisprof.com buycialisprof.com, ncqjto,

  2. Safe online blackjack
    January 19th, 2014 at 07:06 | #2
    Reply | Quote

    jpjmgbtznquptjt, Play online blackjack for money, WeiDcyA, [url=http://elcuerpodescifrado.com/]Online Blackjack[/url], tNDJOqK, http://elcuerpodescifrado.com/ Online Blackjack, GToQiOE.

Comments are closed.