“Any fool can make things bigger, more complex, and more violent. It takes a touch of genius--and a lot of courage--to move in the opposite direction.”
Global mega-mergers left many banks “too big to fail”—so important to the economy that governments could not let them fail. This created “moral hazard”—with no fear of failure, they had less incentive to avoid risks. Subsequent regulations gave banks further incentives to inflate bubbles—and as truly global institutions, they had an impact across the world.
It was an unholy Holy Week. On April 5, 1998, Palm Sunday, lawyers thrashed out a merger that revolutionised finance. Citicorp, long the most truly international bank, was to merge with Travelers ...