The Legacy of (Laws Against) Branch Banking

Courtesy of NYT Business:

Despite the power of big banks, small institutions still dominate huge swaths of the country and hold nearly half of bank deposits overall.

Arianna Huffington is, of course, wrong…and lucky that her mindless project is backed by deposit insurance. The interesting question is; in the absence of deposit insurance (like, say, during the Great Contraction), would Huffington still stupidly advocate moving capital to smaller, less efficient firms (especially out of large firms that have a rather strong implicit backing by the Federal government[1])? I think so — remember, big business is de facto bad.

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[1]No, I don’t support any backing by the Federal government, but that principle doesn’t trump the fact that it is always wise to take the advantages you can get.


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