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Four Questions to Ask Before Breaking Up the Banks

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Four Questions to Ask Before Breaking Up the Banks

Brookings Institution,

5 min read
5 take-aways
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What's inside?

In a post-Dodd-Frank world, should the US government still break up the big American banks?

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Editorial Rating

9

Qualities

  • Innovative

Recommendation

“Break up the banks” has been a rallying cry in the 2016 US presidential campaign, but Brookings Institution fellow Aaron Klein poses four questions concerned voters should consider before deciding the issue, which is more complex than it appears on the surface. Klein posits that, while the current regulatory framework has some shortcomings, it is much too early to abandon it simply because railing against big banks sounds good on the campaign trail. While always politically neutral, getAbstract recommends this informative article to anyone interested in potential changes to the US banking sector.

Summary

The 2016 presidential campaign in the United States spotlights a call to split up the big banks. Many people question whether the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 can successfully address systemic risk. Four questions can provide guidance to voters and policy makers on the issue:

  1. “Can I keep my bank?” – One approach to breaking up banks is to limit their size. But customers, who continue to choose large over small banks, might not favor downsizing. Should institutions shrink, millions of individuals would need to change banks...

About the Author

Aaron Klein is a fellow in economic studies at the Brookings Institution.

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