Simon Johnson points out that the new bank run is a rather different beast: Long lines of scared consumers don't form at a bank's door. Rather, professional investors batter the banks using financial markets. Johnson notes the irony of this: "It’s the financial markets and instruments (particularly credit default swaps) developed by our biggest banks that have helped drive some of them out of business and that now put the remainder on the brink of collapse." I'd point to the implications: Most major banks have a first-order interest in professional investors and a second-order interest in consumer banking. They're about the pros rather than the amateurs. Which may be why they're so cavalier about exacting fees and penalties on individual depositors at levels they'd never consider applying to professional markets. Indeed, pretty good research suggests that as banks get bigger -- which tends to mean more competitive on the global financial market -- they begin charging consumers more. "Market concentration is found to have a positive and significant impact on the level of personal loans, but not automobile loans. Consistent with the exercise of market power, we find that personal loan rates rise in markets following a significant merger." (The automobile loans don't go up for different reasons).This is important for the conversation over capping bank size. Many folks have pointed out that large banks bring with them certain efficiencies. But those efficiencies, it seems, are mainly oriented towards the professional investment market rather than the consumer market. And it's an open question, I think, how efficient we want banks to be on those markets, particularly if those efficiencies come at a cost to consumer banking. 21ST CENTURY BANK RUNS.
Simon Johnson points out that the new bank run is a rather different beast: Long lines of scared consumers don't form at a bank's door. Rather, professional investors batter the banks using financial markets. Johnson notes the irony of this: "It’s the financial markets and instruments (particularly credit default swaps) developed by our biggest banks that have helped drive some of them out of business and that now put the remainder on the brink of collapse." I'd point to the implications: Most major banks have a first-order interest in professional investors and a second-order interest in consumer banking. They're about the pros rather than the amateurs. Which may be why they're so cavalier about exacting fees and penalties on individual depositors at levels they'd never consider applying to professional markets. Indeed, pretty good research suggests that as banks get bigger -- which tends to mean more competitive on the global financial market -- they begin charging consumers more. "Market concentration is found to have a positive and significant impact on the level of personal loans, but not automobile loans. Consistent with the exercise of market power, we find that personal loan rates rise in markets following a significant merger." (The automobile loans don't go up for different reasons).This is important for the conversation over capping bank size. Many folks have pointed out that large banks bring with them certain efficiencies. But those efficiencies, it seems, are mainly oriented towards the professional investment market rather than the consumer market. And it's an open question, I think, how efficient we want banks to be on those markets, particularly if those efficiencies come at a cost to consumer banking. 
