At least this headline holds true for banks. Steve Randy Waldman, as so often, gives us cogency--in this case on why big banks are a problem. My favorite part (and my emphasis):
Scale breeds agency problems. Earning an extra five basis points on $100B in assets amounts to $50M in extra income a year, a fraction of which can make a manager very wealthy in an eat-what-you-kill bank. Making that same five basis points on a $100M portfolio earns a small bank 50K, a fraction of which amounts to a nice bonus, but not a lifestyle change.
For both managers, the downside if something goes wrong is the same: they lose their jobs.
For both managers, the downside if something goes wrong is the same: they lose their jobs.
For the managers, big is good. For the rest of us, not so much.
