Capping banks’ size would hit consumers Oct 20, 2015
Paul Wilson's research on economies of scale in U.S. banking has implications for recent efforts to limit bank size. His recent paper, "The Evolution of Scale Economies in U.S. Banking," co-authored with David Wheelock of the Federal Reserve Bank of St. Louis, finds that most banks enjoy economies of scale. Scale economies imply that costs decrease as size increases. In a competitive market, these lower costs are passed on to consumers. Hence efforts to limit bank size could negatively impact both banks and consumers by limiting economies of size.Wheelock and Wilson's paper was published as a Federal Reserve Bank of St. Louis working paper in August, and is covered in a Clemson Newstand article here.