The Big Keep Getting Bigger: Too-Big-to-Fail Banks 30 Years Later
James R. Barth and Moutusi Sau
The most recent financial crisis made it clear that something had to be done to make sure that big banks would never again pose such a systemic threat to the financial system that they would have to be bailed out by the government. The main purpose of the Dodd-Frank Act of 2010 was to direct financial regulators to implement reforms to ensure that this would indeed be the case. In view of all the concern today over some banks’ being too big for regulatory comfort, this article offers a look back at the circumstances that gave rise to the decision that bank size per se could be a key factor, and how it came to be that big banks that encounter financial difficulties are treated differently from smaller banks. It maps bank consolidation to show how banks and big bank holding companies have gotten much bigger over the past 30 years.