>> Tuesday, May 1, 2012 – US Banking Sector
The "Too Big to Fail" logic is understood when we look at the asset concentration in the U.S. Banking System in 1970 and 2010.
In my opinion, it still does not justify the bailout of financial institutions and I am concerned about the eventual path taken by the financial system, which can collapse with the collapse of one or two large financial institutions.
The first chart below gives the assets as a percentage of total industry assets for the banking system in 1970
The second chart below gives the assets as a percentage of total industry assets for the banking system in 2010
Very clearly, a smaller number of banks hold most of the industry assets in 2010. One can argue that this is the natural course of any industry. However, as mentioned earlier, it is a cause of concern when the collapse of one bank can potentially trigger the collapse of the entire financial system.
For now, the too big to fail will remain too big to fail and any crisis will result in more bailouts.