The big-bank model isnât going to last much longer, banking industry analyst Meredith Whitney said at the Journalâs Future of Finance Initiative, and said a more sustainable approach would be bigger regional banks. Whitney, famous for foreseeing the troubles facing Citigroup, suggested that key parts of the big banking model made them susceptible to the types of problems that caused the financial crisis. One issue is the physical distance between loan originators and borrowers. Good lending results from a relationship with borrowers, and regional banks are in a better position to take advantage of those relationships. She added that five banks controlling two-thirds of mortgage origination and credit cards is fundamentally unbalanced. Instead, she suggested âsuperchargingâ regional lenders. One possibility is that if stress tests help healthy banks and lead them to return TARP money, some of those funds could be transferred to local banks to encourage consolidation (on a smaller scale) in that sector. She also sees the potential for regional banks to take on business from nonblank lenders who were decimated by the subprime crisis. Regional lenders have grown angry at their larger counterparts, as evidenced by a conference in Phoenix last week. They are angry that the big players have given bankers a bad name. They cheered comments from Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. chief Sheila Bair about the need to clamp down on megabanks. However, not all smaller banks are created equal. While the majority of local banks are faring well and didnât receive any TARP money, most of the 42 banks that have failed since the start of last year were community institutions. http://blogs.wsj.com/economics/2009/03/24/regional-banks-are-the-future/