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Four Questions to Ask Before Breaking Up the Banks
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Four Questions to Ask Before Breaking Up the Banks

Aaron Klein
Brookings Institution, 2016
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Editorial Rating

9

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  • Innovative

Recommendation

“Break up the banks” has been a rallying cry in the 2016 US presidential campaign, but Brookings Institution fellow Aaron Klein poses four questions concerned voters should consider before deciding the issue, which is more complex than it appears on the surface. Klein posits that, while the current regulatory framework has some shortcomings, it is much too early to abandon it simply because railing against big banks sounds good on the campaign trail. While always politically neutral, getAbstract recommends this informative article to anyone interested in potential changes to the US banking sector.

Take-Aways

  • If the United States’ big banks had to downsize, millions of individuals would need to change banks, pay more in transaction fees and suffer from fewer services.
  • If banks were split up into single-function firms, multinational corporations would seek multiple cross-border services from foreign banks, which would lead to reduced American bank profits, jobs and market share.
  • Diminishing banks and partitioning their operations could make obtaining capital market financing more costly and more difficult for businesses and local governments.

About the Author

Aaron Klein is a fellow in economic studies at the Brookings Institution.

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