Democrats & Liberals Archives

Small is Good

Lawmakers and economists keep telling us that monstrously huge banks, such as Bank of America, are “too big to fail.” Yet, these same lawmakers and economists have been writing laws - and now a bailout - to enable big banks to become bigger. Now, however - I did not believe it at first, but it’s so - the former Federal Reserve chairman, Paul Volcker, recommends writing laws to keep banks small!

Paul Volcker headed a special group to recommend measures for reform of the financial system. The group made 18 recommendations. Several recommendations are for the purpose of preventing the growth of big banks and keeping them small. Matt Yglesias discusses this unbelievable development:

The report offered 18 recommendations that would insert government regulators into the boardrooms of financial institutions as never before. The plan calls for vastly increased oversight of major banks, going as far as to recommend the end of an era of mega banks whose size makes their failure potentially catastrophic to the global financial system. To limit their size and scope, banks, the document states, should be prohibited from managing private-equity or hedge funds. And deposits should not be concentrated in the hands of too few banks.

“Keep them small, so that any failure won’t have systematic importance,” Volcker said at a news conference.

Beautiful! If only Congress follows Volcker's suggestions. If only lawmakers break away from financial lobbyists. The road to financial reform is tough. If we pass Volcker's recommendations, the financial system will bring prosperity, not only to the rich, but to the ordinary guy.

While we are at it, let's have a law that prevents manufacturing corporations, such as General Motors, from becoming "too big to fail." When helping General Motors, maybe we should require them to break up into smaller units in order to get injections of cash.

Big organizations are bad for many reasons. Being "too big to fail" is one. Another, perhaps even more important reason, is that big organizations can easily hire lobbyists to influence Congressional legislation. Naturally, they work hard to obtain legislation that benefits them, often at the expense of everyone else.

This is no way to seek the common good.

Big corporations should be kept small so it would not hurt much if they failed and they would not have too much power. Small is good.

Posted by Paul Siegel at January 17, 2009 12:50 AM
Comment #273718

Gee Whilikers, Paul!

I thought I said something like that about 3 years ago but no one wanted to listen.

I’m a big proponent of city and county governments within the state. I believe the states should control the federal government and not the other way around.

Now Paul Volker comes out saying we should keep it small?

He should choke on it and so should anyone who believes the federal government is the first line of defense in maintaining our way of life. We can be taught we live in the land of the free and the home of the brave, but it’s difficult when we blindly pay the majority of our tax dollars to the federal government and then expect our state and county officials to beg to get it back.

It comes back, but it comes back supporting special interests like sidewalks and cherry trees and benches and walking paths. And these efforts are rewarded with election to a higher and more powerful seat in government. The children are moved up in rank via. nepotism.

Small is good, but it is also immaterial when the small is being maintained by the obedience of the local politicians who are toeing the line.

Posted by: Weary Willie at January 17, 2009 3:57 AM
Comment #273726

Lawmakers over the decades simply turned a blind eye for reelection purposes to the rise of the counterpart to monopolies, the oligopolies. An oligopoly being a handful of corporations who create a defacto monopoly buying out start ups and new competitors through various overt and covert behaviors and actions.

In part, Volker’s recommendation undoes parts of the Gramm-Leach-Bliley Act which allowed banks to also become underwriters, and insurance companies, and hedge fund players, and brokerages. Big mistake. Huge. That was the path to oligopolies who could effectively stifle competition and with an unwritten wink and nod, cooperate with each other to set rates, fees, and control the legislative agenda through lobbyist and campaign fund distributions and creation.

Posted by: David R. Remer at January 17, 2009 12:59 PM
Comment #273740

“Keep them small, so that any failure won’t have systematic importance,” Volcker said at a news conference.

Credit unions have been keeping is “small” and “healthy” for decades, while serving over 80 million Americans. With industry and community focus, volunteer Boards of Directors, credit unions work to serve their members, not customers.

Credit union’s Federal Insurance (NCUA/NCUSIF) is strong and healthy. Credit unions are well capitalized and growing.

Banks could have learned from them a long time ago.

Not-for-profit financial services.

Posted by: Honest at January 17, 2009 7:27 PM
Comment #273753

So we should break up Microsoft,Exxon,Apple,General Mills,Boeing ?

Posted by: bills at January 18, 2009 2:01 AM
Comment #273755

What happen to the idea that Bigger is Better?

Why I do believe that banks should be well regulated and to that end believe that smaller is better. I also see the need for banks to be large enough to handle the business of Consumers and the Small Business Owner. And why I do not know where the balance to that question hides I do believe the Left needs to answer it before the Center and Right will agree to the changes recommended by Paul Volcker.

Posted by: Henry Schlatman at January 18, 2009 2:47 AM
Comment #273757

Financial institutions should never get large enough to swallow debt and breath out vapor. How bad was it when banks were held responsible for the loans they made? If a bank doesn’t have enough assets to loan more money, perhaps it is time it reassessed its community position…selling that debt, in order to be able to lend more, may not be the best choice.

Posted by: Marysdude at January 18, 2009 6:17 AM
Comment #273787

The problem is that banks were allowed to sell their debt in order to keep making loans with less and less oversight on if they had the Real Money to cover their books.

Thus why some nortage brokers and banks ceo’s could show a profit. Like any game chance it was who is holding the bad pieces of paper whem the game got called.

So moving forward I do believe that Financial Institutions should be kept small enough in order to maintain oversight. However, I do believe that Community Based Banks and Loan Services should be allowed to grow big enough to service the population without unwanted competition. The 64 million dollar question is how will the reform in Washington help the average Consumer and Small Business Owner maintain the balance with the Funds held by the Taxpayer.

Posted by: Henry Schlatman at January 18, 2009 5:50 PM
Comment #273788

I’m glad when somebody else steals my thunder. I heard it on the air the other day. The vast majority of the American people are too big to fail.

Posted by: Stephen Hines at January 18, 2009 6:32 PM
Comment #273794

>I do believe that Community Based Banks and Loan Services should be allowed to grow big enough to service the population without unwanted competition.
Posted by: Henry Schlatman at January 18, 2009 05:50 PM


Unwanted competition…what kind of competition is that??? Smaller means competition…larger means too big for competition…I thought lack of competition was the biggest problem, i.e., Lehmans, et al, bought up their competition until they became too big to fail…AIG was so big there was no competition, thus too big to fail. One of the biggest problems with ‘Gramm’, was it created an atmosphere wherein these mergers and buyouts ran rampant, and it also culled out any kind of real oversight.

Competition is goooood! Smaller is goooood!

Posted by: Marysdude at January 18, 2009 7:37 PM
Comment #273795

Mr. Hines,

Critique the message, not the messenger…you have no idea how much overweight I am…:)

Posted by: Marysdude at January 18, 2009 7:39 PM
Comment #273800

While the lack of competition does leads to a “Cat” getting lazy, having to much competition in the same area will cause all the “Cats” to go hunger.

Certainly a town of 5,000 does not need as many banks as a city of 50,000; however, allowing a bank from a city of 500,000 come into both the smaller cities without restriction will only lead to the smaller banks not being able to compete on a level playing field.

Thus, as the Big Banks may provide a city of 5 million with good service. Allowing those same banks to go into smaller markets where they have no Vaulved Interest will always lead to trouble. And the same can be said for letting small banks enter into markets that they have no Vaulved Interest.

So, why competition and smaller banks sounds better to some. The lack of having a level playing field in which all finncial institutes can provide the Consumer, Small Business Owner, and Taxpayer with Fair Sound Services will find us back in the same problems we are looking at today.

Posted by: Henry Schlatman at January 18, 2009 10:48 PM
Comment #273809


??? I’m sorry, but I don’t get it. If, instead of one bank serving five million, wouldn’t competition be an asset if there were five banks serving a million each in that city?

Posted by: Marysdude at January 19, 2009 2:32 AM
Comment #273815

Why I am not a financial expert I do know that Big Banks can do things that smaller banks cannot due to their limited assets. And why I realize that makes no sense whatsoever, it actually does once you learn why the two exist in the first place.

So, let me ask you a simple question. Would you rather deal with one bank or several banks to get a loan? For why a bank that service 5 million will by its very nature have more assets and thus handle a larger loan. Trying to get the 5 banks servicing a Million each to share the same mortage is the problem that has lead to the current condition. Since if you fail to make a payment to one bank and they foreclose. What avenue does the other four banks have to insure that they get their money back?

So, I hope you see why sometimes a Big Bank is better for a Community than several smaller ones. And though not every Consumer, Small Business Owner, or Taxpayer in a city needs to make a huge loan (several million), knowing that Local Government and other Institutes of a Community may need such a loan I do believe that it is easier to oversee one loan than several small loans adding up to the same amount.

Posted by: Henry Schlatman at January 19, 2009 5:24 AM
Comment #273857

Too bad you guys can’t see that our present govt is one of those things that has become “to big to fail.”
We need legislation or some kind of document to fix that.

Posted by: kctim at January 19, 2009 4:35 PM
Comment #273865

>Too bad you guys can’t see that our present govt is one of those things that has become “to big to fail.”
Posted by: kctim at January 19, 2009 04:35 PM


I’m sorry, but that is the silliest thing I’ve read in a very long time…name me a point in our national history when our government was NOT to big to fail. What would it mean to America if the government was too small to succeed? How small would it have to be to be just right to succeed, but not too big to fail? Who would determine the balance of the two? How would it be measured? How long would it last?

Please take that one back, and try another.

Posted by: Marysdude at January 19, 2009 7:24 PM
Comment #273872

In Their Wisdom, the Founding Fathers of America gave the Government to “We the Peopl” and why I realize that things in the World seem that they are going to Change. As one who has stood up against My Community Elders and Peers I can surely tell you that is wrong.

True, certain issues like Energy will expand the Understanding of Man and His Society. Plus some business pactices will no longer be allowed; however, given the fact that We the People are the Government and by default will not give up our Guaranteed Civil and Constitutional Rights to be Human. I do believe that the Human Race is to big to fail.

Posted by: Henry Schlatman at January 19, 2009 8:03 PM
Comment #273903

How about from our founding to the point where govt started running our lives?
Who would determine the balance? Try what was created to determine the balance and you have your answer.

Our govt is terribly run, wastes money and abuses its power…just like those “evil” corps you guys always complain about.

Posted by: kctim at January 20, 2009 9:29 AM
Comment #273906

To be honest, and with all due respect, this new-age lovey dovey phrasing you use makes it hard to hear the point you are trying to make.

If you are saying you think I am waiting for some worldly change that is not coming, you are mistaken.

I only care how my country changes, and it is and has been changing for the worse.

Posted by: kctim at January 20, 2009 9:50 AM
Comment #273911

Paul -

As an economist and conservative, I couldn’t agree more. Oversized corporations are the enemy of competition and transparency. They can wield influence over policymakers in good times by buying them, and in bad times by threatening to collapse and take down a big chunk of the economy.

“Too big to fail” shouldn’t happen in an active capitalist country.

Republicans perhaps forgot recently that one of the key roles of the government is to protect competition and prevent monopolies. Hopefully, they’ll join Democrats in writing laws that protect competition and consumers (as Adam Smith most eloquently promoted) and end corporate welfare for campaign-contributing companies and unions.

Posted by: Chops at January 20, 2009 11:25 AM
Comment #273915

I rearranged my finances after the beginning of the year. One bank account was getting .5% interest. I’ve avoided the megabanks, but my banker says they are looking to buy other banks. Sounds like a bad idea. We went through all this years ago. People interesting in the history should look back at what happened after Continental Illinois got involved with Penn Square

Posted by: ohrealy at January 20, 2009 12:25 PM
Comment #273930

What you call “New Age Lovey Dovey Phrasing” is actual “Old School Down and Dirty Phrasing” intended to protect the Natural Gap of Knowledge held by Man and Woman. So why you may find it hard to understand. As a Gentleman, let me challenge you to explain the Argument of Partake as it pretends to Your Guaranteed Civil and Constitutional Rights.

And why change may scare you. As one old enough to remember living in the Late 60’s and Early 70’s I know that My Elders and Peers did not build a “Prefect World” and niether will the Elders and Peers of the 21st Century in the eyes of Their Children. However, compared to those who believed that the Government should hand every citizen what they need and those citizens who believed that they had a God Given Right to Exploit anyone and everyone I do believe that over the last 40 years America has come a long way.

So, tell me what change you disagree with and how through Grassroot Movement it can be done better. Should we do away with Cable TV? the Internet? Availability of Goods and Services? Yes, what will it take to make you say that America is wirking to build a “Better World” for as Humans that is the very best that Adults can do and maintain the Hierarchy of Society.

Posted by: Henry Schlatman at January 20, 2009 3:54 PM
Comment #273932

Good catch on the article. For why I do not blame the Stockholders of a Corporation, it does show what happens when the CEOs of a Business try to hard to grow faster than Common Sense dictates especially when it is limited to a certain sector of the economy.

Why I agree that no single business should ever be to big to fail. As a counterpoint, would not regulating a sector to the point where no one could touch in this case the Federal Reserve Banks deny the competition you seek or put undue burden on the Customer?

Yes, the government failed IMO to oversee the Boom to Bust mentality of the Market over the last 15 years. However, lacking the ability how can the Market set the Agenda for America for the next 20-40 years without “We the People” pointing them in the right direction?

No, the “Bubble” was created because of everyone rushing from one fade to the next. So, as much needed Rule and Regulation going forward would you agree that the Market should tell the Investors when a sector is reaching max capacity and start pentalizing Corporations and Financialy Advisors who try and take advantage of an over invested sector of business.

Posted by: Henry Schlatman at January 20, 2009 4:17 PM
Comment #273934

With all due respect, again, the “Old School Down and Dirty Phrasing” you use still sucks in getting your point out.

Change doesn’t scare me at all. But not following the guidelines when changing does nothing to preserve what made us great, and changing from what works into something that has failed over and over is pointless.
That is the change I disagree with and we, as a country, are way past the point of a grassroot movement that respects the Constitution ever coming to be again. It will take another revolution to accomplish that.

What will it take to make me say that America is working to build a better world America?
Respect, not reinterpretation, of the US Constitution. Or that revolution thing I mentioned above.

Posted by: kctim at January 20, 2009 4:48 PM
Comment #273938

Why I agree that it makes it hard to get my point across at times. Not wanting to break a promise made to My Community Elders and Peers some 35 years ago, I can only hope for the day when the Democratic and Republican Leadership in America will change their ideology.

For why they still believe that everybody can become good little corporations and continue to follow that ideology. I bet you would be surprised to learn that the Elders of the 70’s kept intact your right to openly disagree with them.

So, still allowed to hold an Independent Political View, how would you go about insuring Every American becomes Economically Viable and Financially Independent as a Citizen by Freewill? For Freedom by anyother name does not match the Vision of the Founding Fathers of America.

Posted by: Henry Schaltaman at January 20, 2009 5:09 PM
Comment #273941

It is not my responsibility, nor is it the govts responsibility, to ensure every American becomes “Economically Viable and Financially Independent as a Citizen by Freewill.” That is the responsibility of each individual.
It is govts responsibility only to ensure we all have the freedom to pursue such a goal if we so desire.

That is the vision of the founding fathers. Not this individual freedoms limiting and rights trampling govt that forces beliefs and compliance, monstrousity our govt has morphed into.

Posted by: kctim at January 20, 2009 5:35 PM
Comment #273946

Having battled your Elders over the same question for years, I hope that your Children will someday be able to explain to you why through education and peer pressure change for the better will always lead those willing to stay with the Status Quo.

Nevertheless, just as the Yoputh of the 60’s and Silver Spoons of the 70’s could not explain the diference between an Individual being Ignorant and Stupid I do believe that Americas’ Democratic and Republican Civil, Political, and Religious Leaders will need our help in learning the difference between a Nation being Ignorant and Stupid about that which we know and do not know.

However, the price of Freedom comes from the fact that the best Man can hope for is to be Politically Unalienable Correct today so that the Future can judge them to be Unalienable Right. Thus, why many issues of the 70’s have gone unanswered by Americas’ Democratic and Republican Civil, Political, and Religious Leaders. Like Man and Woman in the Parenting of a Child I do not see “We the People” changing our individual ways until they are proven wrong.

For example;
The conventional wisdom of the think tanks of the 20th Century believe that America must drill for oil in order to supply Americas’ Transportation System with fuel. However, looking into the Future I do see the day when Americans can drive a car that can produce more electricity than it uses.

Yet, given the fact that it will take Americans some years to transform from a Fossil Fuel Transportation System to a total electric system how does the President of the United States and Congress deal with the problem today. Since just as TV will go digital in Feb of 09, if I am not mistaken that date was moved forward from 06 by President Bush due to the complaints that business could not meet the date set by Congress in the 90’s.

And than there is the rest of the World to consider. For if America moves to be Energy Independent in the next 5-10 years. What unforeseen problems will that have on Society?

For what started out as “We the Corporation” in the Late 60’s and Early 70’s was changed in the 80’s by President Regan and the adoption of the Race to the Bottom. And why the two Bush and Clinton Adminstrations did nothing to change the direction of the Country, today America stands ready on the edge on the Dawn of a New Day. So again I ask what changes would you make in order to ensure Every American has the opprtunity to become Economically Viable and Financially Independent as a Citizen.

Posted by: Henry Schlatman at January 20, 2009 7:02 PM
Comment #273948


You missed my point…if the government is MY government, it had better be too big to fail. Why in the world would I want ‘failure’ built into my government? Even if I mught want to rebel and change it, I would not want it to be weak enough to fail on its own. Don’t you find it even a little bit silly to want a government with a ‘failure’ button, so that when it gets to point ‘B’ in growth, it folds up?

Posted by: Marysdude at January 20, 2009 7:26 PM
Comment #273950

Old enough to remember when point “B” equaled MAD, today gives me hope that My Community Elders, Peers, and Their Children in the 21st Century has grown up enough to know that Failure especially as an American is not an Option.

Posted by: Henry Schlatman at January 20, 2009 7:39 PM
Comment #273977

I understand your point, I just disagree with it. Maybe because we differ on what would be a failure?
I am talking about the govt control that has come from its growth and we absolutely must have that button to push when govt oversteps its bounds.
Through bribery, we have relinquished control of that button to those whom would be most affected by it being pushed.

Its time to acknowledge that our govt has become nothing more than a corporation that is “to big to fail,” push that button and “refresh the tree of liberty.”

Posted by: kctim at January 21, 2009 9:58 AM
Comment #273984


I knew what you meant…I chose to land on it because it sounded so silly to wish for a government that fails, if it grows. You can call it a failure because it grows, but it is unrealistic to expect it to remain small, just to please you. I’m pretty sure the Peter Principle and the Power Pyramid prevail in government as elsewhere, and if that is so, your wish that it remain small is a ‘failed’ wish.

Posted by: Marysdude at January 21, 2009 1:30 PM
Comment #274007

Govt CAN grow with its population without growing into their lives, and our Constitution gave us the framework to do just that.

Yes, my wish is a failed wish and I am not naive enough to believe it will change in my lifetime. But, it is a wish that I share with our founders, so I don’t feel too bad about having it.

Posted by: kctim at January 21, 2009 5:59 PM
Comment #274015


You rub elbows with some mighty fine folks. But, they were as varied in their desires and beliefs as we are. I’m not sure just how serious they were about your small-enough-to-fail government…

Posted by: Marysdude at January 21, 2009 7:30 PM
Comment #274021

Why we are not divided as much as you think. I do understand your concern. And though Protocal forbids me from exploiting that difference, let me say that there is more in Common with Big and Small than different.

For example;
A small town and a big city needs roads, water, and sewer. And though the scale may be different, the fact that Americas’ Democratic and Republican Elected Civil, Political, and Religious Leaders are bound and governed by limited funds (taxes they recieve from the population) run along the same lines.

Thus, why New York, LA, and other major cities may need more schools, libaries, and culture centers I know of no Law that prevents a town and its citizens from building a libary in every home.

Yes, America has grown as “We the Corporation;” however, the fact that Labor and Management still has not figured out to make every American Consumer Economically Viable and Financially Independent in accordance to their own addition to Bling-Bling is more a matter of Arrogance and Ignorance of both parties ideology IMO.

So in the Spirit of moving forward I do believe that America would be better served if “We the People” had a Button to eliminate Stupidity rather than a Button that would allow Big to fail.

Posted by: Henry Schlatman at January 21, 2009 10:46 PM
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