Economics - General

Too Small to Fail

In “Too Small to Fail, ” The Washington Monthly writes on the success of conservatively-managed small banks in the midst of the financial market collapse. 

Why are small banks succeeding?  First, they are running their business more conservatively; in the tradition of, well, traditional bankers.  Secondly, they develop personal relationships with customers giving them superior information about their customers credit worthiness.   Ben Bernanke terms this being rich in “informational capital.”  Of special note is the following quotation:

According to FDIC data, the failure rate among big banks (those with assets of $1 billion or more) is seven times greater than among small banks.”

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