[rayiner]

In an industry-wide crash, as was the case in 2008, it doesn't really matter whether a dozen smaller banks fail or a few bigger ones do. And on the flip-side, big banks are a lot more efficient than small ones, for the same reason Wal-Mart and Amazon are more efficient than mom-and-pop stores. Everyone loves to hate Amazon, but who wants to go back to the days before same-day drone delivery? Similarly, who wants to go back to the mortgage rates that existed before big banks and securitization?

[imgabe]

If there's a dozen\* small banks it seems less likely that they would all fail at the same time than if there's only three humongous banks. Diversity and all that. Hence, we could limp along with 6/12 small banks rather than being screwed and having no financial system if all 3 major banks go belly up.

\* Specific numbers obviously made up for illustrative purposes only.

[yummyfajitas]

That's true if bank failures are uncorrelated, which is so far from reality as to be an irrelevant assumption.

If this were true, then the US banks should have weathered the financial crisis far better than Canada's (highly consolidated). That's the complete opposite of reality.

[toomuchtodo]

> And on the flip-side, big banks are a lot more efficient than small ones, for the same reason Wal-Mart and Amazon are more efficient than mom-and-pop stores.

I don't care much for efficiency when it allows for the penalty-free violation of the law. Efficiency isn't the end all, be all metric.