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Corporations on bank breakup: ‘Meh’

By Claes Bell, CFA · Bankrate.com
Thursday, August 23, 2012
Posted: 5 pm ET

The idea that big banks need to be split up has found support in some surprising places lately. Mainstream figures in finance from Federal Reserve Bank of Dallas President Richard Fisher to former Citi CEO have come out lately in support of breaking up the big banks, both to safeguard taxpayers from future bailouts and to help make those institutions more manageable.

Big-bank CEOs are unsurprisingly miffed about the idea, suggesting that doing so would hamper corporations' ability to get the loans they need to operate and expand their businesses. But it turns out, corporations themselves aren't so sure about that.

From Maria Aspan at American Banker:

JPMorgan Chase Chief Executive Jamie Dimon has argued that big corporate customers rely heavily on the sophisticated financial services only megabanks can provide, including big loans, global cash management and deal advice.

"We bank some of the largest global multinationals in America and around the world," Dimon testified at a Senate Banking Committee hearing in June on JPMorgan's massive trading losses. "We can do $5 billion revolvers or raise money for America's Fortune 100 companies in a day or two when they needed to do something. … These are services they need."

Claiming big multinationals "need" big banks might be a bit of an exaggeration, say treasurers at those large companies. Yes, a separation of banks' commercial and capital markets operations would inconvenience big businesses and raise costs, corporate treasurers and their representatives acknowledge. But for big businesses there are downsides to dealing with giant financial firms as well -- and they are in no rush to defend the megabanks.

"Is it going to have a material detrimental impact on corporate America if they were broken up? I doubt that," says Jeff A. Glenzer, who oversees public policy for the Association for Financial Professionals, which represents corporate financial executives.

As I wrote in the story linked above, it's unlikely a government-engineered breakup of the big banks will come to pass. But I do think it's possible this dialogue could give regulators some cover to strengthen the Volcker rule enough to preclude banks from pulling a London Whale again in the future.

What do you think? Should the big banks be broken up? Are they really essential to the economy?

Follow me on Twitter: @ClaesBell

(Hat tip on the headline to @MariaAspan)

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