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A Perplexed Economist Confronts 'too Big to Fail'

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  • F. M. Scherer
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    Abstract

    This paper examines premises and data underlying the assertion that some financial institutions in the U.S. economy were "too big to fail" and hence warranted government bailout. It traces the merger histories enhancing the dominance of six leading firms in the U. S. banking industry and he sharp increases in the concentration of financial institution assets accompanying that merger wave. Financial institution profits are found to have soared in tandem with rising concentration. The paper advances hypotheses why these phenomena might be related and surveys relevant empirical literature on the relationships between market concentration, interest rates received and charged by banks, and economies of scale in banking.

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    File URL: http://eaces.liuc.it/18242979201002/182429792010070202.pdf
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    Bibliographic Info

    Article provided by Cattaneo University (LIUC) in its journal The European Journal of Comparative Economics.

    Volume (Year): 7 (2010)
    Issue (Month): 2 (June)
    Pages: 267-284

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    Handle: RePEc:liu:liucej:v:7:y:2010:i:2:p:267-284

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    Related research

    Keywords: systemic risk; market concentration; mergers; scale economies;

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    Cited by:
    1. Lee, Li Way, 2013. "Merger wave in a small world: Two views," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 43(C), pages 68-71.
    2. Xavier Vives, 2011. "Competition policy in banking," Oxford Review of Economic Policy, Oxford University Press, vol. 27(3), pages 479-497.
    3. Günther, Susanne, 2013. "Eine ökonomische Analyse der Systemrelevanz von Banken," Arbeitspapiere 139, Westfälsche Wilhelms-Universität Münster (WWU), Institut für Genossenschaftswesen.

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