Warren Stephens: How Big Banks Threaten Our Economy

As of this past January, any bank operating in the United States with more than $50 billion in assets must have the business equivalent of a living will—plans for what to do in the event of catastrophe. Every well-managed business should have contingencies and ways to assess its health and viability. But the fact that the Dodd-Frank financial regulations require the largest banks to submit detailed plans for worst-case scenarios suggests something is seriously amiss.

We all know what happened when the "too big to fail" banks teetered on the verge of collapse in 2008. The government stepped in with $700 billion of taxpayer money, justified by the notion that failed banks would destroy our economy. (Of the eight biggest U.S. banks, only J.P. Morgan Chase didn't receive a bailout.) Three years later, we have Dodd-Frank's complex regulations and banks that are bigger than ever.

The solution isn't to demand that the big banks plan for disaster—it's to take steps to prevent disaster. We need bank reform that addresses the root of the problem: Some banks are simply too big—for their own good, as well as that of investors, the economy and their customers.