Are the big banks lost?

“Have corporations lost whatever ethical compass they once had?”

Camden Fine, ICBA President, on Twitter

Yesterday, from The Financial Times: “The ethics of banking are broken.”

I can’t help but wonder if the “ethics” problem in banking today is as much a problem of largesse. Forget Too Big to Fail – are the JP Morgans and Barclays of the world too big to manage?

This was suggested during the JP Morgan earnings call Friday, with banking analyst Mike Mayo asking if JPM was “too big to succeed” – and promptly scoffed at by CEO Jamie Dimon, who commented that JPM’s size is its strength. But is might right? Ethical issues don’t come from just nowhere – sure, you hire the occasional bad egg, but the big issues are often a result of systemic failure – a lack of oversight, a culture of “looking the other way”.

Today just five U.S. banks hold over half of banking industry assets. Is it time to break up the big banks? An April article on BankDirector.com, reported that analysts from Keefe, Bruyette & Woods warned that investors should be prepared for the eventual break-up of the big banks, including JPM, and that, as a result of increased regulation and size inefficiencies, the ten largest banks will “shrink or break up”.

Whatever the case, community banks are taking the fighting back – suing the big guys of essentially being mobsters by violating the racketeering act and working together keep interest rates artificially low.

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