BizJournals Portfolio
Home >   Business Views, Opinions and Blogs >   Business Blogs >   Market Movers >  

Another Reason For Banks To Be Small

Market Movers

by Felix Salmon
Main
GM's Whining Bondholders   Ecuador Gold Reserves Datapoint of the Day

Recent Blog Posts

Links

Mar 31 2009 11:35am EDT

Another Reason for Banks to be Small

Mike at Rortybomb finds some empirical research on what happens to loan rates when banks get bigger and more consolidated. The results make intuitive sense: as competition falls, loan rates go up. The exception is loans which can be securitized, like auto loans: those rates can fall as economies of scale improve.

The lesson here is that we should keep banks small, while encouraging securitization -- which of course itself helps in reducing the size of banks' balance sheets. Bank competition is good for consumers; big banks are bad for consumers. It's worth remembering that, as we construct a new regulatory regime.

. □

Comments

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.


Connect With Portfolio.com
Like Portfolio on Facebook

Come on, like us—you know you want to.

Follow Portfolio on Twitter

Follow us and if you're an innovative entrepreneur, we'll return the favor.

The Mix

Today's top stories, conversation starters, and the back nine business bites.

spotlight on

Slideshows

500 Startups Hits New York

Dave McClure's brainchild makes its way to New York and introduces East Coast money folks to some intriguing new companies. View Slideshow