LIUC
The European Journal of Comparative Economics
ISSN: 1824-2979
LIUC
EJCE
Year: 2010, December. Volume: 7 - Issue: 2

A Perplexed Economist Confronts 'too Big to Fail'

F. M. Scherer

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Start page: 267 - End page: 284

Keywords:
systemic risk, market concentration, mergers, scale economies
Abstract:
This paper examines premises and data underlying the assertion that some financial institutions in the U.S. economy were "too big to fail" and hence warranted government bailout. It traces the merger histories enhancing the dominance of six leading firms in the U. S. banking industry and he sharp increases in the concentration of financial institution assets accompanying that merger wave. Financial institution profits are found to have soared in tandem with rising concentration. The paper advances hypotheses why these phenomena might be related and surveys relevant empirical literature on the relationships between market concentration, interest rates received and charged by banks, and economies of scale in banking.

Jel code: G2
Jel code: L8
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