From the Conglomerate Blog and Erik Gerding--via the Professor--how's this for over the horizon radar. Ten years before the banking scandal and the so called too big to failure crap hit the fan this was old news for Arthur Wilmarth:
"Transformation of the U.S. Financial Services Industry(2002 U. Ill. L. Rev. 215) article, which I mentioned in that earlier post (we love our banking law in our household), she convinced me that Arthur Wilmarth really deserves wider recognition.
Read this article (it’s long) carefully. Almost everything in it displays an uncanny prescience. Consider just this quote from p. 224:
Doubts about the claimed advantages of universal banks are buttressed by concerns that the creation of large financial conglomerates will intensify the “too big to fail” (TBTF) problem in the financial markets. Over the past two decades, leading banks, securities firms, and life insurers have pursued aggressive lending and securitization programs, as well as speculative underwriting and investment activities in the markets for securities and financial derivatives. As a result of these high-risk activities, large financial institutions have become increasingly vulnerable to disruptions in the capital markets. Moreover, the growing concentration of securities and derivatives activities within a small group of major financial institutions increases the likelihood that the failure of any big institution could create systemic risk and trigger a costly bailout by federal regulators.
That’s just the tip of the iceberg. Remember this article was published in 2002! "
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