Banks: The Big Get Bigger
The financial crisis has created an environment where, because of government-funded bailouts, big banks are getting bigger, as the small ones struggle.
Many small banks who accepted bailout money are in jeopardy of failing. Hundreds have not yet paid back their bailout money. Meanwhile, the larger banks all seem to be faring pretty well, having mostly paid back what they owed the government. The reasons for the different experience over the past few years of big and small banks is pretty simple to explain. Big banks have more diversified balance sheets, so their loan losses weren’t as concentrated or severe as small banks’ loan losses. When it came to mortgages, for example, most big banks sold many of them to investors through securitizations, while smaller banks more likely held them on their balance sheets.
