Finance

Geithner: Relatively Speaking, Our Banks Are Small

Tim Geithner talks to Melissa Block on today's All Things Considered. The conversation includes some back-and-forth on bank size. Geithner argues (as have other administration officials) that risk — not size — is the key issue.

He says:

The Great Depression was a crisis of small bank failures across the country. And Bear Stearns, Lehman Brothers, two failures that brought our system to the edge of collapse, were relatively small institutions. So the most important thing to do is about limiting risk. ...

Our [financial] system is much less concentrated than any other major economy. Look at Canada to the north where they have really only five institutions that have everything. But they also had a much more stable system than we did.

Also our banks are much smaller, as a share of our economy, than is true for any other major economy. What's critical is about risk, and limiting the risk they take.

Here's a counterargument, from Johnson and Kwak's new book 13 Bankers.

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