Introduction: Intelligence Squared U.S. (04:19)
Intelligence Squared U.S. chairman Robert Rosenkranz notes J. P. Morgan's recent troubles and discusses the arguments for and against breaking up banks that are "too big to fail," and debates over the role of big banks in the financial crisis.
Moderator John Donvan introduces the debate and the panelists.
For the Motion: Richard Fisher (06:46)
Richard Fisher, president of the Federal Reserve Bank of Dallas, notes the bailout of "too big to fail" banks. Dodd-Frank shackled small banks and has not stopped concentration of power in big banks. He presents the affirmative team's plan to break up big banks.
Against the Motion: Paul Saltzman (07:31)
Paul Saltzman, president of the banking trade group Clearing House Association, says we have strengthened the banking system since the financial crisis. Breaking up the big banks is an unnecessarily radical solution. Large banks bring benefits. Small banks aren't safer; financial crisis results from bursting bubbles, regardless of bank size.
For the Motion: Simon Johnson (07:38)
MIT professor and former IMF economist Simon Johnson rejects claims of the benefits of big banks, arguing they have only become really big in the last 15 years. Dodd-Frank does not eliminate risk.
Against the Motion: Douglas Elliot (07:30)
Douglas Elliot of the Brookings Institution accuses the proposition debaters of not arguing for the same plan, or of not presenting a plan that fits under the resolution. He argues for the need for big banks. Small banks took the same risks as large ones leading up to the financial crisis.
Summary of Arguments (01:36)
Moderator John Donvan summarizes the panelists' arguments for and against breaking up "too big to fail" banks.
QA: Are Big Banks Too Big to Fail? (04:11)
Saltzman says banks should not be bailed out when they fail, but Dodd Frank and other changes have ended "too big to fail." Moderator John Donvan presses him on whether J.P. Morgan failure would be catastrophic. The sides debate the positions of various authorities on this question.
QA: Were Big Banks a Stabilizing Influence During Financial Crisis? (01:44)
Saltzman defends the claim that big banks stabilized the economy, saying many big banks did not need bailouts but instead helped by acquiring failing institutions.
QA: Would J.P. Morgan Collapse Bring Economy Down? (01:44)
Fisher argues that big banks are still too big to fail. Elliot says Dodd-Frank implementation will put the government in a position to allow them to fail.
QA: Is Proposition Plan Topical Under Resolution? (02:47)
Does the proposition advocate reducing banks' balance sheets, or separating them into smaller banks by function? Fisher argues for limiting taxpayers' exposure to commercial banking operations; the market will solve optimal bank size in the absence of implicit subsidies. The opposition argues that this plan is not topical under the motion.
QA: Will Dodd-Frank Solve? (05:18)
Johnson says Dodd-Frank has mostly not been implemented due to successful industry lobbying. Saltzman says the banking industry has supported constructive changes. Fisher says Dodd-Frank only hurts small banks with regulatory burden. Panelists debate whether small banks were bailed out or allowed to fail during the savings and loan crisis.
QA: Does Global Business Necessitate Big Banks? (03:22)
Johnson says the proposition doesn't advocate very small banks, only getting them down to the size they were in the 1990s. Saltzman says the proposition team has no way of knowing how big banks should be, and notes their role in financing $100 billion+ mergers.
QA: Has Consolidation in Banking Industry Caused Consolidation of Industry? (04:13)
The opposition team argues that banks have become big in response to technology needs and economies of scale. Panelists debate the optimal levels of concentration in banking.
QA: Is Glass-Steagall Division of Banks by Function a Good Idea? (05:10)
Elliot argues that Glass-Steagall is not topical under the resolution, speculation about effects notwithstanding. He argues that Glass-Steagall would not be desirable given today's financial transactions.
QA: Is Government Unable to Prosecute Big Banks? (01:54)
An audience member notes Attorney General Holder's statement that banks' size make government reluctant to prosecute. Saltzman says big banks are constantly prosecuted, for political reasons. Johnson argues that government is reluctant to prosecute.
QA: How Will the Market Respond to Splitting Big Banks? (02:02)
Fisher says the market would reward efficient banks rather than assuming large banks are safe.
QA: How Would Proposition Plan Deal with International Banks? (01:27)
Fisher rejects the argument that U.S. banks must be big to compete internationally, arguing that excessively big banks are unmanageable.
QA: Should We Break Up the Fed? (00:57)
An audience member argues that the Federal Reserve is the real culprit in bank concentration. Panelists dismiss the idea of breaking up the Fed.
QA: How Could the Economy Handle Breakup of Large Banks? (06:35)
An audience member asks how we could manage the breakup of big banks given their complexity and the assets at stake. The proposition team argues that more efficient operators will take over the business, absent subsidies. Panelists debate whether implicit subsidies allow "too big to fail" banks to borrow at below-market rates.
QA: Will Breakups Create Even Bigger Banks? (03:59)
An audience member says that two of the companies born of the AT&T breakup are bigger than AT&T ever was. Fisher says size is fine, as long as it doesn't come with the promise of a bailout.
QA: Are Big Banks More Efficient? (00:60)
An audience member argues that JPMorgan isn't very efficient. Elliot says he doesn't know enough about Morgan specifically to comment.
Closing Statement Against: Paul Saltzman (02:35)
America needs global banks. People yearn for simpler times after the financial crisis, but small banks also created systemic risk, bringing the Great Depression and S&L crisis.
Closing Statement For: Richard Fisher (01:03)
Fisher advocates a proposition vote as an endorsement of competition and an end to bailouts.
Closing Statement Against: Douglas Elliot (02:09)
Elliot rejects the idea that bankers deliberately create large firms to get "too big to fail" subsidies; rather, customers see advantages to big banks and have driven concentration.
Closing Statement For: Simon Johnson (02:18)
Johnson cites Theodore Roosevelt's anti-trust action against Northern Securities and urges the audience to follow in that tradition.
Additional Resources: Intelligence Squared U.S. (04:16)
Additional Resources: Intelligence Squared U.S.
Break Up the Big Banks: Vote Results (01:09)
Pre-Debate - For: 37% - Against: 19% - Undecided: 44%
Post-Debate - For: 49% - Against: 39% - Undecided: 12%
Additional Resources & Credits: Intelligence Squared U.S. (00:55)
Additional Resources & Credits: Intelligence Squared U.S.
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