Unlike the business environment for banks in the 1930s, however, securitization and repo lending are national – if not international – activities, with little to suggest that any advantage would be derived from local knowledge. It seems quite possible that the economies of scale associated with the NFB model are sufficiently high that the industry structure would tend toward oligopoly, or even monopoly.
That is, too much franchise value might be created. In that event, there would be significant additions to the cost side of the proposal’s ledger, in the form of the price and quantity effects that result from non-competitive industry structures. Regardless of the eventual structure of the industry, NFBs essentially would be monolines, with highly correlated risk exposures.