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JPMorgan earnings show 'too big to fail' banks getting bigger

JPMorgan Chase's surging earnings show that many of the biggest US banks are becoming more powerful. What happens if they get in trouble again?

In this Oct. 1 file photo, a Chase bank branch is shown in New York. JPMorgan Chase & Co. reported strong third quarter earnings Wednesday, Oct. 14.

Mark Lennihan/AP

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Big financial firms are emerging from crisis even larger and more powerful than they were before.

It's a trend punctuated by surging earnings reported Wednesday by JPMorgan Chase, the largest US bank, and it poses a challenge for US policymakers.

The question is: How can regulators reduce the risk of another financial crisis should these banks get into trouble again. In other words, if they were too big to fail then, they would seem to be even more so now.

In addition to questions about maintaining financial stability, this issue also includes risks for the vibrancy of the US banking system, on which the whole economy depends. Some finance experts say that the efficient flow of credit is at risk as more power becomes concentrated in the largest hands.

A sign of progress?

In some ways, it's a sign of progress that such concerns exist.

The largest banks are no longer teetering on the brink of failure, as some appeared to be earlier this year. And the strongest ones are doing even better than expected. That banking recovery has helped to buoy confidence that a broader rebound in the economy is getting under way.

But it's also a sign that the longstanding "too big to fail" challenge has grown even bigger.

"There is definitely an increased concentration [of market power] in the industry," says Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Mass. "Indeed, the 'too big to fail' situation has gotten worse."

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