Too big to fail? Too big to succeed: Citigroup

Citigroup, yet another big American (failed) bank, recently applied for and were approved for emergency funding by the federal reserve. I am getting rather bored of typing that opening sentence in my articles, and I'm sure that this will not be the last time I need to do so, but since it's the first time I'm doing so in my blog, I'll let it go... just this once.

The reason that the fed has given us in order to justify this decision is the constantly recycled phrase, "too big to fail". I agree... It is far to big to let it fall, but is that a good thing? People look to these companies, banks and organisations and ask them, 'why are you failing?'

I have the answer, and any activist-capitalists amongst you will not like it. These failing banks are too big. The federal reserve and the bank of england (amongst others) have given large business a little too much slack, in my opinion. This worked great during times of prosperous economic strengh, but now that the global economyis turning, this business model is not proving to be quite so weathered as it was thought to be.

Large banks have been allowed to do whatever they please, moving away from their 'core competance' of lending money and breaking legs when people can't pay it back. Banks now provide insurance, mortgages and manufacture lollipops! It has gone beyond a joke.

Banks are now suffering from what can only be described as 'taking their eyes off the ball'. Problems are occuring all over the banking industry in all sectors and the bigger banks are finding it hard to handle all of them at once. Banks, who have little or no experience in the feilds of insurance, investment and others are now suffering from a little thing that I like to call 'incompetance'. No organisation can successfully navigate such turbulant waters, no matter how large or competant they are. Because the war is being fought on so many fronts, these large bastions of capitalism are going to fall and bring our economies down with it.

A bank that is simply a bank will do as well as it can be expected to do. In fairness, all banks, mortgage lenders, investment banks and building societies are struggling. Dispite this, they are not likely to fail, whereas the larger 'all-in-one' banks are being barraged by a number of problems, and are evidently failing under all of this weight.

It truily is a shame that the banking system has been allowed to get to this stage. The big banks are, indeed, to big to be allowed to fail, but they now bring the rest of the banking system down with them. The banking sysyem has got to the point where most of the banks are not only too big to be allowed to fail, but are also too big to succeed in such turbulant times. If there is still a banking system after this recession, it will need consolodating... Badly!