Regulating banks and competition

This week’s The Economist has an article about a small bank in Texas which is challenging in court the Dodd-Frank act passed two years ago to increase the regulation of the banking industry.

I have a theory that most if not all economic legislation works to restrict competition and it appears the Dodd-Frank act does this by making life difficult for the small banks.

It also appears small banks, or at least this one, being small have to follow prudent banking practices and have fewer opportunities to gamble with other people’s money.

Maybe the best way to regulate the financial industries is to ensure they are highly competitive and repeal legislation which restricts competition.

Of course the big banks would turn their lobbyists loose on this one.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

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One Response

  1. Banking is inherently economically unstable and yes, dishonest. The fundamental banking process is confidenc trick (an economically necessary confidence trick) and seems to attract dishonest people to theindustry.
    Yes, honest and efficient banking regulatin is fundamentally necesaary for thefinancial system and the free enterprise to survive periodic inherent crises.

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