On Too Big To Fail As A Company Strategy and Other Links

Here are two stories I found interesting. The first is on a BIS paper which says that there are no real scale economies beyond a certain point in banking. Company size is driven by the implicit taxpayer guarantees too big to fail financial institutions get.  The second story is in German but says the same thing about the mergers of healthcare providers in Germany – there is no reason for the mergers except to gain too-big-to-fail size.

Warren Buffett

The Usual Fare

  1. crocodilechuck says

    I can recall a Mckinsey paper from the ’90’s which stated that banks achieved scale economies through mergers-but only up to $150M! In my experience, gargantuan banks incur excess costs in efforts to coordinate-multiple lines of business, multiple markets-and countries, and regulators, and the ‘left undone’ tasks from prior mergers (see Citi, BoA in this regard) such as multiple IT systems and back offices. They’re slow, late and non-responsive-because they have too many execs and too many layers of bureaucracy. See Yves Smith for more in this regard.

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