Parting Reflections on the Series on Large and Complex Banks

The motivation for the Economic Policy Review series was to understand better the behavior of large and complex banks, and we have covered a lot of ground toward that end. We have examined large banks? economies of scale, their proclivity toward risk taking, their possible funding advantages (pre-Dodd Frank), the sources and types of their complexity, and the sources and means of dealer bank financing. We have also looked at resolution issues surrounding large and complex banks, including a case study on the Lehman bankruptcy, a review of resolution methods, and two studies of the rationale for a long-term debt requirement for large and complex banks (bail-in), which could provide a source of loss absorbency in resolution. In this post, we provide our own thoughts on what the series has taught us.