Too big to manage: US megabanks’ competition by innovation and the microfoundations of financialization

Article


Cerpa Vielma, N., Cömert, H., D’Avino, C., Dymski, G., Kaltenbrunner, A., Petratou, E. and Shabani, M. 2019. Too big to manage: US megabanks’ competition by innovation and the microfoundations of financialization. Cambridge Journal of Economics. 43 (4), p. 1103–1121.
AuthorsCerpa Vielma, N., Cömert, H., D’Avino, C., Dymski, G., Kaltenbrunner, A., Petratou, E. and Shabani, M.
Abstract

Disagreements over the systemic implications—the future—of financialization can be traced in part to the absence of sustained attention to the role of banking firms in driving this secular shift forward. That is, the financialization literature lacks an adequate microfoundation. Accounting for the drivers of financialization processes solely at the macro level overlooks the problems of how these processes came about and whether they are sustainable. This paper addresses this explanatory gap, arguing that a key independent microeconomic driver of increasing financialization did exist: the incessant efforts by money-centre banks in the USA to break out of Depression-era restrictions on their size, activities, and markets. These banks’ growth strategies in turbulent times led to an institutional (meso) shift—the rise of a megabank-centred shadow banking system—that now shapes global financial architecture even while operating in ways that are unsustainable. In short, too-big-to-manage megabanks are at the heart of the fragility and instability of the economy today.

JournalCambridge Journal of Economics
Journal citation43 (4), p. 1103–1121
ISSN0309-166X
Year2019
PublisherOxford University Press for Cambridge Political Economy Society
Accepted author manuscript
License
File Access Level
Anyone
Digital Object Identifier (DOI)doi:10.1093/cje/bez027
Web address (URL)https://doi.org/10.1093/cje/bez027
Publication dates
Print06 Aug 2019
Online04 Jul 2019
Publication process dates
Accepted20 May 2019
Deposited20 Sep 2019
Copyright holder© 2019 Oxford University Press.
Copyright informationThis is a pre-copyedited, author-produced version of an article accepted for publication in Cambridge Journal of Economics following peer review. The version of record: Nicole Cerpa Vielma, Hasan Cömert, Carmela D’Avino, Gary Dymski, Annina Kaltenbrunner, Eirini Petratou, Mimoza Shabani, Too big to manage: US megabanks’ competition by innovation and the microfoundations of financialization, Cambridge Journal of Economics, Volume 43, Issue 4, July 2019, Pages 1103–1121, is available online at: https://doi.org/10.1093/cje/bez027.
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Accepted author manuscript

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