“There are economies of scale when dealing with regulation.”
That’s the understatement of the Obama era. Robert Greene at Harvard’s Kennedy School of Government said it as his boss, former Wall Street banker Marshall Lux, rolled out his research suggesting that the 2010 Dodd-Frank financial regulation law has fallen disproportionately on smaller banks.
JP Morgan CEO Jamie Dimon said this would happen–that Dodd-Frank and other regulations would create “a moat” protecting the larger guys from competition.
Treasury officials have said that Dodd-Frank would turn the biggest banks into, effectively, government-sponsored enterprises.
That’s why big business is the natural ally of big-government liberals. Liberal economic policy scholar Bill Galston argues this point:
Lux, and Harvard’s Kennedy School, says his research suggests that “Dodd-Frank created a too-small-to-succeed problem in addition to the too-big-to-fail problem.”
The Financial Times gives a snapshot of the data: “Community banks lost 6 per cent in market share between 2006 and mid-2010, during the worst of the crisis. But, since the passage of Dodd-Frank in early 2010, the decline in market share has doubled to more than 12 per cent.”
It’s an open question whether Dodd-Frank curbs the big guys or protects them. Only time will tell. But Lux’s study is the latest reason for those who (rightly) worry about bank concentration to be wary of regulation.
