Are there banks “too big to exist”? According to the Bank of International Settlements (Bis), in Basle, the answer is: yes. In its 2009 annual report, the Bis wrote bluntly: “In the future, a financial firm that is too big or too interconnected to fail must be too big to exist”.

However some bankers could argue that, if a financial group is big, even gigantic, there must be a reason: economies of scale or economies of scope, for instance. This is doubtful and economists know that very well. The former Federal reserve Chairman Alan Greenspan has confirmed this: in his paper about “The Crisis” prepared for a Brookings Institution conference on March 19, 2010, he wrote that for years “Federal Reserve research had been unable to find economies of scale in banking beyond a modest-sized institution”.

Indeed, a study written in 1994 by Allen B. Berger, then in the Board of Governors of the Federal Reserve System, and David B. Humphreys, observed: “Scale and scope economies in banking are not found to be important, except for the smallest banks”; this means “that larger banks do not have lower average costs than middle size banks”, and “that there is only limited potential for scope and product mix economies as banking firms merge”. In addition they found that “mergers have no significant predictable effect on efficiency—some mergers raise efficiency and others lower it”, and that “market concentration results in slightly less favorable prices for customers, but has little effect on profitability”.

Five years later, in 1999, in a speech before the American Bankers Association, in Phoenix, Arizona, Greenspan admitted that “megabanks being formed by growth and consolidation are increasingly complex entities that create the potential for unusually large systemic risks in the national and international economy should they fail”. At that time Greenspan envisaged only a better regulation and a better supervision: “Regrettably, we did little to address the problem”, he wrote in his 2010 paper “The Crisis”. But many years ago, in the last century Thirties, a true libertarian like Henry Simons knew very well that in each business sector gigantic corporations were a bad thing for the economy, and even for freedom and democracy.