Reposting this because it is all too-significant. We have a moment here to rally against political corruption. Anyway you look at the graphs below, big corporations have moved into the higher echelons of political power, and size is a significant attibute or contributor. Tomorrow, there will be a break up the banks bill, which I believe is possibly the biggest reform to large corporations in 80 years.
(This post was formerly called “Too Big To Fail In Graphs”)
These images speak for themselves. Lobbying in the years leading up to 1999 for the repeal of the Glass-Steagall Act of 1933 (the Gramm-Leach-Bliley Act repealed G-S), which sought to protect people’s commercial deposits from being fodder for risky investments, was successful at helping to create new kinds of mergers and new kinds of bigness in the markets.
With the introduction of a new version of the Glass-Steagall Act by likes of Senator McCain, it’s a good time visit how big have these banks gotten since its repeal in 1999. With more time and resources, even more interesting graphs can be made — looking forward to any collaboration (just send me a note or leave a comment).
Obama knows that studies show that highly concentrated markets mean banks have more risk in their portfolio, right? He can lead the country with brilliant solutions to these problems.
I’ve taken graphs from around the web and overlayed when Glass-Steagall was repealed. I made the third graph below.
Thanks to Open Secrets.org and the Sunlight Foundation for their visualization of campaign contributions – see their full visualization here.
Thanks to Celent Researchers for their work on studying the efficiency of small banks and large banks.
Thanks to Celent for their oft-cited numbers on how much market concentration there is in the finance industry.
Top 5 banks hold 95% of derivatives and now look how many we have:
“Finally, the financial sector will become smaller and less leveraged. That is the only way the sector can be returned to soundness and profitability in the environment that is likely to prevail in the post-crisis period. However, such retrenchment has to be seen against the earlier growth of the sector. Let me mention a few figures in this connection. From 1990 to 2006, the GDP share of the financial sector in the broad sense increased in the United States from 23% to 31%, or by 8 percentage points. During the same period, the increase in the GDP share was in excess of 10 percentage points in the United Kingdom but significantly less – around 6 percentage points – in both France and Germany. Graph 3 shows the development of the share of the financial sector in GDP for selected major advanced economies since the middle of the 1980s. The figures on profits are even more striking. For example, the financial services industry’s share of corporate profits in the United States was around 10% in the early 1980s but peaked at 40% last year.” Thanks, Mar
Archein
To tell the truth- I’m not sure that the financial industry hasn’t sacrificed the public’s trust for good. Perhaps what we really need is to make sure the financial industry can NEVER get big again- by banning interstate trade in financial instruments, and limiting stock markets to dealing in just a single state.
These charts sort of make it look like the repeal of Glass-Steagall could have been the result of increasing bank size (and thus political influence), rather than vise versa. I’d love to see more granular data…
Not sure why reinstating Glass-Steagall is gaining support in Congress for those looking to address too big to fail. It’s not at all clear that it is the solution. Makes me think they’re not really serious about fixing the problem.
[...] How does size relate to political corruption and distortion in the market? [...]
[...] the banks would promote free markets and restore real competition. We’ll also begin to slay political corruption (it makes too big to fail possible) in a way that all of America can love. “Our big banks are the product, not of economics, but [...]