A response to Neel Kashkari (https://www.minneapolisfed.org/news-and-events/presidents-speeches/lessons-from-the-crisis-ending-too-big-to-fail)
Hard cases make bad law. Such is the case for the 2008 crisis. I don’t think having smaller banks would have changed 2008 — financial crises are endogenous to capitalism and fractional reserve banking, and 2008 was a 1-in-100-year event.
In fact, 2008 might have been worse if there were dozens of banks to worry about saving, not just a few. Further, trying to create a world where a state will never backstop its banking system seems quixotic and illogical to me.
With hindsight, the obvious regulatory failures were permitting significant increases in gross leverage — especially at investment banks — and missing the growth of the shadow banking sector. I support your idea of making banks more like public utilities, but remember they are already heavily regulated! I think we can agree on: dial back the leverage and treat banks more like utilities. (But, I think it’s logical banking sector consolidation¸ not balkanization, follows from this view!)