Community, Mega, and Goldilocks Banks in U.S. History
37 Pages Posted: 18 Mar 2015
Date Written: March 16, 2015
Abstract
Three types of banks, community (small, relationship-based), mega (very large, transaction-based), and goldilocks (middling, mix of relationship and transaction-based) are surveyed throughout U.S. banking history. Megabanks are relatively new and while they pose threats to macroeconomic stability they are not strictly necessary for economic growth. Economies of scale have been found in some recent studies but they appear to include underpriced government insurance and rewards for bad behavior (profits > penalties). Regulators should encourage community and, especially, goldilocks banks by reducing/eliminating subsidies to megabanks.
Keywords: community banks, large banks, regional banks
JEL Classification: G21, N21, N22
Suggested Citation: Suggested Citation