Breaking (Banks) Up Is Hard to Do: New Perspective on Too Big to Fail

James Barth and Apanard Prabha
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Apanard Prabha: Milken Institute, Santa Monica, CA

Working Papers from University of Pennsylvania, Wharton School, Weiss Center

Abstract: Big is bad. At least that has become the view of many individuals about big banks ever since the financial crisis of 2007-2009. The fear is that if a big bank gets into trouble, its problems will infect other financial institutions and threaten the entire economy. In theory, of course, regulators have long been expected to prevent banks from reckless behavior and to shut down failing banks in a timely, orderly, and cost-effective manner. Historically, however, big banks in the United States and in many other countries have been implicitly treated as "too big to fail." In the United States, the practice of treating troubled big banks differently from troubled small ones dates back to the 1984 bailout of Continental Illinois Corporation.

JEL-codes: G20 G21 G28 (search for similar items in EconPapers)
Date: 2012-12
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Citations: View citations in EconPapers (2)

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Chapter: Breaking (Banks) Up Is Hard to Do: New Perspective on Too Big to Fail (2013)
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