The following expresses my personal views, not those of the SEC or its staff.
A few months ago I wrote a post entitled “Why do bankers make so much money?” A corollary question is, “Why do the largest banks make so much more than other banks?”
Addressing this question can help us solve the problem the largest banks pose for systemic risk, and open a channel for demands to curb their outsized profits. Profits that, by the way, are not exactly coming from producing real goods like steel or flat screen TVs. Goldman Sachs might stand foremost in Matt Taibbi’s view as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”, but all of the largest banks are increasingly seen as machines of wealth transfer, devising ways of pulling money from your pocket into theirs.
- Amount of risk taking
- Supplying and pushing of derivatives and other “innovative products”
- Complexity and opaqueness of operation
- Incentive structure and level of compensation
- Ability to call on government support (too-big-to-fail coupled with political weight)