Wild Kingdom: Another TBTF Lesson From Nature

First, vampire squids. Now, it's the elephant seal whose character is being besmirched to make an unflattering point about big banks.

Andrew Haldane, the executive director of financial stability for the Bank of England, recently used the 6,000-pound beast as an example of a self-interested force of nature that seeks individual success at the cost of his own species' potential extinction. "Large males fight for the right to mate with a whole beach full of females," Haldane said this spring in Berlin at a conference of the Institute for New Economic Thinking.

"For elephant seals, it is, quite literally, winner-takes-all. And the key to winning is simple-size."

Great size, however, nearly pushed the elephant seal into extinction by making it an easy mark for human hunters who found the blubbery animals flopping helplessly near the shoreline.

Much like the seal, Haldane said, banks also have engaged in survival "arms races" in which self-interest has threatened systemic ruin.

Prior to the financial crisis, banks continually clawed their way past each other in executive pay, leverage, high-frequency trading and return on equity, in "a case not so much of 'keeping up with the Joneses as 'keeping up with the Goldmans,'" Haldane said.

Once a Goldman achieved an ROE of 20 percent, competitors felt the pressure to top it, accelerating a "high-risk equilibrium" that had banks desperately seeking more sources of leverage to maintain momentum until borrowing hit a wall.

When the crisis struck and the margin calls came, the financial industry was trapped like the cumbersome, slow-rolling bull caught too far out from the sea.