Discuss the wisdom of having financial institutions that are recognized as ‘too big to fail’ and the moral hazard they present to the economy at large.

ECON 3

The commercial banking structure in the US has changed a great deal in the past 30 years. Today the market structure of banking is that of a small set of globally huge banking behemoths (Citigroup, Bank of America, Wells Fargo, JP/Chase, etc) and a much larger set of much smaller banks. The big banks since the 2008 crisis have been characterized as ‘too big to fail’ and are even now in their own category of bank regulations.

Discuss the wisdom of having financial institutions that are recognized as ‘too big to fail’ and the moral hazard they present to the economy at large.