Professor William Black:

It is a complex mix. The Senator is correct that many technological changes have created rivals to traditional banks and that these rivalries have reduced the profit margins in banks and are likely to do so in the future. There is testimony in the Senator's counterpart, about which I would be a bit sceptical, of banks claiming that they lose money in traditional activities. Whether or not they are correct, if they have that mindset, it is going to create pressures to find higher yield. There are two ways to create higher yield, one of which I have talked about at length, which is the recipe, but the other one produces large profits and it is basically fleecing one's customers. That is the PPI model. Both of those are very, very bad things that one would want to prevent. I do not think we are going to be able to prevent technology from changing. It does not particularly upset me that there are private entities that take equity risks as long as they are not bailed out and do not create a systemic risk to the system. If their shareholders want to have an equity fund and win or lose, that is okay by me, but it brings me to the subject we have not mentioned yet, the other grave danger, which is the systemically dangerous institutions, the ones that are so-called too big to fail. One simply should not ever have an Irish champion like that. That is nuts. You cannot bail out Europe in that sense. If one puts oneself hostage to a champion, it is not a champion anymore. As soon as it fails, and it is a question of when and not if, Ireland would be back in a crisis. Do not hitch your star to an institution too big to fail. It will create absolutely perverse incentives.