Well, it appears as if at least one (or two) arms of the Federal government is favoring the former, with a whole slew of alphabetical programs, TARP, this and that, not to mention explicity guarantees that they will not let these banks fail due to their size and the risk they pose to the financial system overall. Of course, they then encourage these banks to get even bigger and pose and even greater threat to the system (see links below).
We have compared the revenue breakup for the top 20 commercial banks with smaller midsized banks (market cap b/w- $250-$1,00 mn). Large commercial banks on an average derive only 50% of their revenues from core banking operations (net interest income) compared with an average 73% for smaller sized banks. Even the max Net Interest Income / Total Income for large sized banks (64%) is less than the average of 73% for small and midsized banks. Despite higher risks taken by large commercial banks (undercover hedge/speculative investment funds), as evident from higher proportion of non interest income, these banks have received disproportionate funds from Fed under various programs.
Net Interest Income / Total Income | ||||
| Average | Median | Min | Max |
Top 20 banks | 50.5% | 55.2% | 26.2% | 64.3% |
Banks with market cap of $250 mn to $1 bn | 73.1% | 74.3% | 43.2% | 92.6% |
More on the need to break up the big banks:
- The Fed Believes Secrecy is in Our Best Interests. Here are Some of the Secrets
- Why Doesn't the Media Take a Truly Independent, Unbiased Look at the Big Banks in the US?
- As the markets climb on top of one big, incestuous pool of concentrated risk...
- Any objective review shows that the big banks are simply too big for the safety of this country
- Why hasn't anybody questioned those rosy stress test results now that the facts have played out?
- An Independent Look into JP Morgan