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Banks Don’t Do Much Banking Anymore—And That’s a Serious Problem

Wednesday, February 5, 2014 - 5:17 AM
From the Pacific Standard:
Some U.S. banks, especially at the community level, still employ this basic model today, taking deposits and making loans. But our biggest, Wall Street-centered banks—the ones who hold the majority of the nation’s deposits, slowly consolidating the banking system and growing ever larger—don’t do a whole lot of banking anymore.
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4
Ken TuminKen Tumin5,469 posts since
Nov 29, 2009
Rep Points: 125,077
1. Wednesday, February 5, 2014 - 9:12 AM
The financial sector accounts for 8.4 percent of the country's GDP, a greater share than five years ago and one of the highest percentages of the past half century. The industry's recovery from near-collapse a few years ago has likely occurred in part because the Federal Reserve spared no expense getting the nation's largest banks back on their feet. Some institutions received more than a billion dollars in undisclosed emergency Fed loans -- a much larger package than the $700 billion bailout package approved by the Treasury Department, Bloomberg reported earlier this year.

"Decades of “financialization”—a term economists use to describe the growing scale, profitability and deregulation of the financial sector relative to the “real economy”—allowed banks to become too big, too speculative, and too opaque in the years leading up to the financial crisis. Even with the passage of the Dodd-Frank regulatory reforms, financial institutions like Bank of America, Citigroup and JPMorgan Chase remain “too big to fail.”

-   Economics professor Alan Blinder, a past vice chairman of the Fed, hired Ben Bernanke at Princeton University
4
ShorebreakShorebreak2,613 posts since
Apr 6, 2010
Rep Points: 14,167
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