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Crash-prone banks are like SUVs

By Holden Lewis · Bankrate.com
Thursday, April 22, 2010
Posted: 2 pm ET

As a motorcyclist and a driver of a VW Jetta, I can't stand SUVs.

I dislike SUVs for the same reason that I hate having an airline seat reclined into my lap: People are taking too much space, inconveniencing me (airline seat) or putting me in danger (SUV), and they're not reimbursing me. They're imposing costs on me and thus aren't paying their fair share. In economics lingo, they're imposing externalities.

I'm reminded of SUVs when I read President Barack Obama's speech today at Cooper Union, in which he argues for financial reform.

"First, the bill being considered in the Senate would create what we did not have before: a way to protect the financial system, the broader economy, and American taxpayers in the event that a large financial firm begins to fail," Obama said.

If I had Marcel Proust's immense talent in explaining long chains of thoughts and associations (I surely don't), I could explain how that snippet of Obama's speech reminds me of comments that I've heard from some SUV drivers over the years. What I've heard SUV drivers say, many times, is: "I like to be in a big vehicle so I'm protected in a crash."

They believe traffic crashes are inevitable.

Similarly, JPMorgan Chase CEO Jamie Dimon told the Financial Crisis Inquiry Commission three months ago: "My daughter asked me ... 'What's a financial crisis?' And I said, 'Well, it's something that happens every five to seven years."

The CEO of one of the country's biggest banks believes bank crashes are inevitable.

Both the SUV drivers and the CEO of Chase believe their giganticness provides protection. But for whom?

I can't force SUV drivers to downsize to subcompacts so they have to rely on their driving skills and seatbelts for protection. (Better yet, put 'em on motorcycles so they can discover how massive SUVs conceal motorcycles from other drivers.) But can't we force big banks to break up and downsize so they don't run over the taxpayers when they crash?

Jamie Dimon thinks he's going to crash every five to seven years. He wants financial reform to provide him a better seatbelt. I would feel safer if we put him behind the wheel of a smaller vehicle.

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1 Comment
Jon M.
April 23, 2010 at 3:05 pm

"I can't force SUV drivers to downsize to subcompacts so they have to rely on their driving skills and seatbelts for protection. (Better yet, put 'em on motorcycles so they can discover how massive SUVs conceal motorcycles from other drivers.) But can't we force big banks to break up and downsize so they don't run over the taxpayers when they crash?"

I forget the exact term, but it's something along the lines of "consumed benefit"... it's the same reason traffic fatalities (rate per mile driven) haven't dropped even though airbags, seatbelt laws, etc. have gotten better over the years- we consume this factor of safety with faster cars, higher speed limits, and wider lanes.

It's the unfortunate ultimate example of consumerisim.... we'll even consume our "factor of safety" until it no longer exists.

If jamie Dixon gets a better seatbelt he'll just drive faster to compensate.