Move over "too big." There's a new knock on the megabanks: "too connected to fail," CNNNMoney reported.
Two studies published in the past few weeks tackle the issue of whether big banks get special privileges because of their connections to top regulators and Washington officials.
Both studies focus on the early days of the financial crisis. The first, titled "The Value of Connections in Turbulent Times," came last month from a group of five economists, including MIT's Simon Johnson, who has been a vocal proponent of breaking up the big banks. The Johnson study finds that shares of banks with stronger connections to Timothy Geithner rose 11.2 percent more than those that didn't after news was leaked back in 2008, at the height of the financial crisis, that Geithner was to become secretary of the treasury.
The second study arrived last week and focuses on the Federal Reserve and the loans it made to banks in 2007 and 2008. The study, by George Mason University economics professor Benjamin Blau, finds that banks receiving emergency loans spent significantly more -- 72 times as much -- on lobbying in the decade prior to the financial crisis than those that didn't get assistance. What's more, even after Blau adjusted for size, he found that banks with political connections got bigger loans than those that didn't.