Cut Up The Big Banks?

The big banks, the ones too big to fail, are actually composed of smaller subsidiaries of varied banking types. One may be in the retail business which has a value of its own. Another may be in the investment banking business that has a value in its own right. Another section of the bank may do trust and advisory work. And so on.

Theoretically, each of the bank’s sections or subsidiaries can be made into an independent bank, operating on its own. The value in each case will depend on the sector’s profit reliability and also risk factors.

It’s been estimated that the total market value of each subsidiary of a typical giant bank will produce a market value greater than what currently  exists for the bank.

So why not divest some, on behalf of stockholders? While separating out risk that can have a domino effect on the overall bank and the entire economy? (See the Earl J. Weinreb NewsHole® comments.)