Too Big to Fail

There are some 6,000 banks in the U.S. The biggest six have $10 trillion in assets, almost twice as much as the next 30 combined. The six biggest banks in the U.S. and Europe have increased their assets more than five-fold since 1997. That’s a lot of money in a small number of hands. It might mean that failure is still not an option, as governments decided in the panic of 2008, introducing "too big to fail" to the daily lexicon. Anger soared over the disbursement of $700 billion globally to save banks, while many homeowners and businesses went under. Regulators have been working ever since to make it possible for even the biggest financial institutions to close without triggering a meltdown.

Jerome Powell, President Donald Trump's pick to head the U.S. Federal Reserve, said in his confirmation hearing in late 2017 that new rules had ended too-big-to-fail, a view not universally accepted. Trump has been an outspoken critic of some of those rules, enabled by the 2010 Dodd-Frank financial reform law. One of his first executive orders directed the Treasury Department to see how financial regulation, which he blames for hampering economic growth, could be eased. The resulting proposals include lifting some of the regulatory burden on smaller banks, raising the asset threshold at which banks are subject to tougher scrutiny, and rewriting the Volcker Rule, which prevents banks from trading for their own accounts. The changes mostly focus on what regulators could do without legislation, as the narrow margin Republicans hold in Congress makes it difficult to pass laws unpopular with Democrats. Trump is also naming new bank overseers who are likely to push to deregulate the financial system.