Break Up Big Banks, Readers Say
NEW YORK (TheStreet) -- JPMorgan Chase's(JPM) trading fiasco has readers of TheStreet convinced that the only way to protect taxpayers from future bank failures is to break up the big banks.
In a poll run by TheStreet last week, readers were asked what the right regulatory response to JPMorgan should be. Some sections of the market believe that tighter regulation and eliminating loopholes would ensure that banks don't engage in reckless behavior.
Others believe there is no regulation that can protect the system because the business is inherently risky and that the only solution might be to ensure that banks are not so big that they bring down the whole system.
Readers seemed to lean towards the latter point of view. About 56% of the 218 voters who participated in the poll said banks should be broken up.
"I think we should not allow circumstances to exist that would require us to bail out a business because they are just too big to fail. Such entities should be chopped up into units small enough that the economy can absorb their demise should it come to that," one reader commented.
"Since the taxpayers are not shareholders and cannot reap the benefits of these institutions' profitable successes, then we should not be forced to bail them out when they fail. The size has been identified by both industry and regulators as the reason for our socialization of their losses," another reader said.
Some argued for the revival of Glass-Steagall Act, which separated commercial banking from investment banking businesses.
"Glass-Steagall Act proved its worth in keeping the nations banking safe for almost 70 years. After it was repealed in 1999 our banking system abuse began, eventually collapsing in 2008. Let us just bring it back, unaltered. Banker's human nature has not changed in 100 years, so bring Glass-Steagall back .... unchanged. Don't try to reinvent the "wheel"," DavidU commented.
Bank stock analysts for their part seem to be more in favor of breaking up big banks themselves, as they see the potential of tougher regulations as a more negative outcome for bank stocks.