(Oct. 5, 2015) — The financial crisis is nearly a decade in the past, but UTSA associate professor of economics Edgar Ghossoub says we’re still feeling the effects and are essentially living in a brave new financial world. In a study published in the European Economic Review, Ghossoub argues that because large banks have become bigger than ever, their market power is unprecedented and competition is rapidly becoming a thing of the past.
“As banks get larger, they have more market power,” he said. “Over the past 20 or 30 years, we’ve seen this trend with the number of banks declining. If you can’t compete, you’ll be acquired by another bank.”
While some banks have gotten larger over time as a result of the acquisition of smaller banks, they have also become much larger as a result of the rush of mergers and capital injections during the global financial crisis in 2008. For instance, less than 2% of total banks in the U.S. controlled over 70% of total assets in the banking system in 2013. This makes it easy for them to exert market power through higher ATM and overdraft fees, changing interest rates, charging for checking accounts and denying loans.
“Competition changes things,” Ghossoub said. “If I try to get a loan at one bank and I’m denied, I can go to another bank and maybe succeed there. But without competition, I don’t have many options.”
He compared the lack of competition to the current state of airlines. After years of lackluster profit, most airlines have started charging for every comfort and convenience.
“This could easily happen in the banking industry if things don’t change,” Ghossoub said. “They can charge for everything because no one has any realistic alternative.”
The lack of competition in the banking industry has resulted in power concentrated between a small number of financial institutions, which allows them to control the market without much input from the federal government. For example, if the government decided to lower interest rates to encourage borrowing, the banks have the power to resist. Increasing lending could decrease interest rates further, which negatively affects their profitability. The banks are now so large and have so little competition that they could simply decide not to do it. As a result, the post-recession recovery has been slow.
Banks bearing that infamous moniker “too big to fail” are, to no one’s surprise, burdensome on the economy because of their systemic risk. If they topple, they require political intervention and become too powerful to regulate.
“It’s the result of a free market,” Ghossoub said. “It’s not necessarily a bad thing, but in any market you can’t leave it unleashed completely. You always need regulatory measures, but to what extent is a different story.”
Learn more about economics at UTSA.
The conference will showcase the works of authors, illustrators, and scholars which embody Latino culture and art as a means to promote literacy and reading in Latino children.
Durango Building, first floor, Downtown Campus
Registration is open now for this family-friendly and dog-friendly run that supports the UTSA Alumni Association scholarship fund.
Convocation Center, Main Campus
Join the Department of Interdisciplinary Learning and Teaching for the 14th Annual UTSA Storytelling Festival featuring Nancy Simpson, storyteller and keynote speaker. The event is free and open to the public.
Main Building, Ground Floor Lobby, Main Campus
Students are invited to a semi-formal, dinner banquet with an awards presentation and dancing. Keynote speaker will be San Antonio City Councilman William Cruz Shaw. Tickets must be purchased by Feb 19 at Roadrunner Express. UTSA students are $15 and guests are $20.
H-E-B Student Union Ballroom (HSU 1.104/1.106), Main Campus
Dr. Don Jenkins from UT Health SA will lead this event UTSA with up to 30 certified STB trainers, and train up to 300 UTSA students and personnel in stop the bleed methods.
H-E-B Student Union Ballroom (HSU 1.106), Main Campus
Get to know more about the Bexar County Criminal District Court candidates' stance on the issues before voting in the primary election on March 6.
Buena Vista Street Building, Aula Canaria (BVB 1.328), Downtown Campus
As part of RecycleMania,UTSA will provide sensitive document shredding services for the UTSA community. Bring documents to the parking lot between Student Union & Ximenes Avenue Garage. Document pick up also available for the Downtown and Hemisfair Campuses.
H-E-B Student Union parking lot, Main Campus
Lt. Gen. (Ret.) Koichiro Bansho will speak the importance of the Japan-U.S. relations from the historical and security perspectives. He will go over the history and future of the alliance between the two countries.
H-E-B Student Union, Travis Room (HSU 2.202), Main Campus
The University of Texas at San Antonio is dedicated to the advancement of knowledge through research and discovery, teaching and learning, community engagement and public service. As an institution of access and excellence, UTSA embraces multicultural traditions and serves as a center for intellectual and creative resources as well as a catalyst for socioeconomic development and the commercialization of intellectual property - for Texas, the nation and the world.
To be a premier public research university, providing access to educational excellence and preparing citizen leaders for the global environment.
We encourage an environment of dialogue and discovery, where integrity, excellence, inclusiveness, respect, collaboration and innovation are fostered.