In late 2008, U.S. banks accelerated consolidation driven by intense Federal government pressure (many failing banks were “saved” by being acquired by a larger bank). This yielded a banking structure where today the largest five U.S. banks control over 44 percent of the nation’s banking assets. The five largest U.S. banks held assets of $6.7 trillion dollars at the end of 2014, 39 percent of that year’s GDP value of $17.3 trillion.

One of the Big Five banks is BofA, and I am one of their customers. It is convenient for me to walk up to a BofA ATM machine in Michigan, Florida, Oklahoma, or anywhere in the U.S. and withdraw cash without paying fees.

It is also convenient for regulators at the Fed, the FDIC, and the Treasury to maintain surveillance over just 50 banks rather than say, 500.

The justification for the consolidation in late 2008 went something like this: size helps offset the bad assets on the books and we (the Federal government) will watch over these institutions very carefully now.

I strongly object to current U.S. banking policy. This is despite the convenience to me and despite the convenience to the regulators, although these are trivial. Policy should not be justified by convenience.

Size matters. The risks that $7 trillion in assets pose to a $17 trillion dollar economy are massive. A loss of “just” $1 trillion in 2015 would be six percent of 2014 GDP. One trillion dollars is double the contraction in GDP from 2008 Q3 to 2009 Q2.

Further, the trend is in the wrong direction. This, interestingly, is despite one of the intentions of the Dodd-Frank legislation. The top five’s share of total U.S. banking system assets has grown impressively, growing in every year but one since 1990. In 1990, they held less than ten percent of total assets, and by 2014, they held 44 percent. Soon, the top five banks will be fifty percent of GDP.

Returning to the carefulness of the regulation, just because the government is more involved with managing these large banks does not necessarily mean that the economy is safer. There is often a revolving door between regulatory agencies and those they regulate. This creates the wrong incentives for protecting the economy, and these incentives worsen as the large banks get larger.

We should change policy to begin the process of breaking up these banks. It will not be easy, and it will take time, so we should get started sooner rather than later.