The announced marriage of Travelers Group and Citicorp, and the wave of megamergers it inspired, once again puts size into the policy spotlight. When Fed Chairman Alan Greenspan opens wide the door to giantism, he is ignoring the findings of his own institution. Robert Parry, President of the San Francisco Federal Reserve Bank is more forthright. Large banks like to do business with large corporations. That's why 90 percent of all loans to small businesses are made by small banks.
Large banks are less responsive to the needs of households.
According to Public Citizen, big banks impose higher fees on their customers than smaller banks or credit unions. No wonder almost 7 out of 10 respondents to American Banker's consumer survey preferred community banks. Breaking down the firewalls Congress constructed in the 1930s between the speculative and investment sides of the finance industry will bring few if any efficiencies. The potential harm is not. Separating banks from their communities is a costly proposition.