Investor's Business Daily Stop Treating The Symptoms, Cure 'Too Big To Fail' Disease By _CAMDEN R. FINE_ (http://www.investors.com/search/searchresults.aspx?source=filterSearch&Ntt=CAMDEN+R.+FINE&Nr=OR(Author:CAMDEN+R.+FINE,Author:Camden +R.+Fine)) Posted 04/17/2012 In an opinion piece titled "_Dissolve 'Too Big To Fail,' Not Large Banks_ (http://news.investors.com/article/606741/201204041743/dont-dismantle-big-ban ks.htm?Ntt=frank-keating) " published in the April 5 edition of Investor's Business Daily, Frank Keating — president of the American Bankers Association — wrote that we should not focus on the word "big" in the moniker "too big to fail" but rather put more focus on the word "fail." His thesis is that the multitrillion-dollar megabanks themselves are not the problem and we should not attempt to break them up, but rather we should have procedures to "fail" these systemically dangerous banks. That would be all well and good if what he meant by "fail" had the same meaning as the word "fail" has for all institutions that are "too small to save." I could write an entire piece on "too small to save," but the point I want to make here is that we have to stop treating the symptoms and instead cure the disease. The disease is the policy of too-big-to-fail. Standard Oil Model Focusing on the word "fail" leaves the word "big" and all the negative repercussions that fact has for the financial services industry and our economy. It does nothing to cure the market distortions, the skewing of regulatory policy and actions, damage to consumers and the cumulative effect of regulatory burden enacted on all banks, large and small, in regulatory attempts to control the disease of "too big to fail." Several third-party studies, some by the Federal Reserve System itself, point to the many market advantages that too-big-to-fail banks enjoy over all other competitors. Even a free market guru like former Fed Chairman Alan Greenspan, whom many credit with spurring the creation of too-big-to-fail in the first place, testified that banking regulators should consider breaking up financial institutions considered "too big to fail." On Oct. 15, 2009, Greenspan stated, "If they're too big to fail, they're too big." He went on to say "In 1911 we broke up Standard Oil — so what happened? The individual parts became more valuable than the whole. Maybe that's what we need to do." I agree with Greenspan, and I could add that in more recent times we did the same to AT&T, and the pattern repeated. The parts became more valuable than the whole and spurred competition and the communications revolution — adding tens of millions of jobs to our economy. Think iPhone. One need only look to Japan for examples of what the disease of too-big-to-fail does to an economic and financial system. In 1989 Japan had eight of the 10 largest banks in the world. Everyone was supposed to learn Japanese, and business consultants, pundits and nearly every business book were all saying that America needed to adopt the business models of the Japanese to stay competitive. If our largest financial institutions were not in the top 20, how could America possibly hope to compete and prosper internationally? A Spreading Cancer That was then, this is now. And we all know what happened to the Japanese economy over the past 20 years (the lost decades). What happened to the U.S. financial system and economy when we abandoned the traditional banking models that created the greatest economy the world has ever seen, and blindly followed the Japanese model of "bigger is better" down the rabbit hole? We wound up in fantasy land, and paid the price! So, let's stop trying to treat the symptoms and instead cut out the disease. "Too big to fail" is a cancer on our economic body, and it is spreading and getting worse. As long as these too-big-to-fail creatures survive and get bigger, America's financial markets, consumers, regulatory apparatus, and ability to have truly free markets will be distorted and will diminish over time, ultimately killing our economic future. As President Teddy Roosevelt's attorney general, Philander Knox, famously said in 1902 before the U.S. Supreme Court in the landmark case Northern Securities v. United States, "Uncontrolled competition, like unregulated liberty, is not really free." Or put in today's vernacular, uncontrolled asset concentration (which was why Roosevelt sued Northern Securities in the first place) is not conducive to a free market. Bust 'Em Up Teddy Roosevelt understood that treating the symptoms of asset concentration, which creates too-big-to-fail, would not cure the disease. So he decided he would cure the disease and bust up the "trusts" (the term used in T.R's day in place of "too big to fail"). Teddy Roosevelt, the "trust buster," unleashed the full potential of America's economic power on the world by breaking up the business oligopolies that were strangling America's economy in his time. In the spirit of Teddy Roosevelt, Independent Community Bankers of America will work with Congress to stop the 21st century "trusts" from choking Main Street to death. We will work to cure the disease, not just treat the symptoms. • Fine is president and CEO of Independent Community Bankers of America.
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