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Does the Advantage of "Too Big to Fail" Banks Still Linger?

By Matt Koppenheffer and David Hanson - Mar 31, 2014 at 7:00AM

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Do these numbers show that the perception of the big banks as being too big to fail gives them an edge over the competition?

According to a number of studies from the NY Federal Reserve, the largest banks in the U.S. continue to benefit from the perception that they are lower risk than smaller banks, giving them the ability to borrow at a lower rate. This perception of reduced lending risk with banks such as Bank of America ( BAC -2.46% ) and JPMorgan ( JPM -1.49% ) seems to come from the idea that were another catastrophic collapse to occur, these institutions are still considered "too big to fail," and would receive another government bailout.

In this segment of last week's Where the Money Is, Motley Fool banking analysts Matt Koppenheffer and David Hanson look at the studies, and discuss what the idea of "too big to fail" means today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$44.47 (-2.46%) $-1.12
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
JPM
$158.83 (-1.49%) $-2.40

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