Spitzer: Banks Are Too Big, Let Them Fail

Instead, back smaller entities, ex-gov says in first Slate column
By Kevin Spak,  Newser Staff
Posted Dec 4, 2008 11:02 AM CST
New York Gov. Eliot Spitzer arrives at Purchase College's 40th Anniversary Gala at Millennium Broadway Hotel, in this Monday, Nov. 12, 2007 file photo in New York.   (AP Photo/Gary He, FILE)
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(Newser) – The government has doled out trillions in rescue funds, but “so far, we are simply rebuilding the same edifice that just collapsed,” writes newly-minted Slate columnist Eliot Spitzer. For years we’ve concentrated capital, creating gigantic “financial supermarkets” that attempted to provide every service for their customers. “That model has failed,” Spitzer concludes, and left us prey to the onerous “too big to fail” argument.

Now, the banks are consolidating yet further. Wouldn’t it be better to break them apart into vigorously competing smaller entities, none of which was indispensable? “It is time we permitted the market to work,” Spitzer says. “This means true competition, with winners and losers.” Instead, we’re investing in “a failed business model … and failed risk management that holds nobody accountable.”