Notes from the CEO

Does “Too Big to Fail” Really Mean Too Complex to Manage?

A recent Wall Street Journal opinion piece written by Richard Fischer and Harry Rosenblum calls for bringing back balance and parity to the financial system and to level the playing field between community banks and other players in the industry such as mega banks, credit unions and non-bank financial firms.  Read a PDF copy of the article here. It’s what the Independent Community Bankers of America (ICBA) has been diligently working toward for years. As a community banker, I fully support these efforts.

I’m interested in hearing what you think. Should we reduce “the size and complexity of the largest banks? ” The authors argue that it will “improve competition and market discipline, important forces that were reduced as the industry consolidated.” I happen to agree. Here is another piece of the article that resonated with me:

After downsizing, the big banks should still have the necessary size to fund large global deals—if not alone, then as part of a consortium, which offers the opportunity for better risk management. Possessing the world’s largest banks is no guarantee of success, as Japan has shown. The many European banks that remain nationalized also show the dangers of bigness.

“To Big To Fail” could be read to mean unmanageable, uncontrollable almost. Mega banks that are out of control … that is a scary proposition.

If you’d like to learn more about the ICBA and their efforts on behalf of community Banks, visit their website: www.icba.org

James E. Beckwith
President & CEO Five Star Bank
jbeckwith@fivestarbank.com

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