The Winning Case Against Megabanks

There continues to be a forceful economic debate about the cost of financial companies that are regarded by officials and by credit markets as too big to fail.

There is no doubt that, during the severe crisis of fall of 2008, the executives running these companies felt intense pressure and that responsible officials felt these institutions required huge amounts of government support.

The question is: What has really changed since September 2008, when Goldman Sachs Group Inc. and Morgan Stanley became bank-holding companies, giving them better access to funding from the Federal Reserve? Or since October 2008, when the first injections of new capital were provided to banks that faced big potential losses? Or since November 2008, when Citigroup Inc. received a big additional dollop of support (mostly in the form of downside guarantees)?

There are three responses from the big banks that were ably represented this week at an Open to Debate formerly known as Intelligence Squared U.S. debate in New York. (The topic was Break Up the Big Banks. I was in favor of the motion, supporting the ideas of Richard Fisher, president of the Federal Reserve Bank of Dallas; our side received 49 percent of the final audience vote. Opponents got 39 percent, with the rest of the public undecided.)