13November, 2009

On False Presumption That Large Firms Are Riskier to the Safety and Soundness of Financial Markets

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Letter to Members of Congress: "I write to express serious concern about recent proposals that could cause irreparable economic harm to the growth and job-creating capacity of the U.S. economy. It has been suggested that regulatory agencies should be empowered to preemptively break up or otherwise limit the size and activities of large, global financial institutions. This line of thinking is misguided and could lead to long-term damage to the U.S. economy.

The fundamental error of these efforts is the presumption that being large is inherently bad, more risky, or not in keeping with long-term safety and soundness. This presumption is false. Large institutions provide significant value to customers – in the sheer size of loans they can deliver, in the array of products and services they can provide, and their geographic reach – which smaller institutions cannot provide. This unique economic value is particularly important to large, globally active clients and contributes directly to economic growth."