In a blog posted today on the New York Times’ Web site, Simon Johnson, the former chief economist at the International Monetary Fund (IMF), questions a large U.S. financial institution’s plan to expand global transaction services in emerging markets:

 "Transaction services are important, but they do not require a very large balance sheet; these can equally well be performed by a network of small, nimble financial firms…And emerging markets are risky…Probably there will be relatively good profits for a number of years…But when the cycle turns against emerging markets, as it did in 1982, what happens?”

Mr. Johnson’s observations are reasonable, but have nothing to do with the size of the institution pursuing business in emerging markets.  Perhaps small firms can competently deliver transaction services, but does that fact imply that larger institutions either can’t or shouldn’t also participate in a profitable market opportunity?  As for his warning about the potential ebbing of emerging market vitality, all markets – whether nations, regions, equities, bonds, real estate, etc. – change over time as they evolve and mature.  Navigating such changes and effectively managing the associated risks is the essence of professional finance.

Last week, The Washington Post ran a front page story about the role played by large banks in the financial system.  U.S. financial institutions have taken tremendous steps in recent years to reduce risk on their balance sheets, shore up capital, and focus on prudent, responsible lending.  Claims that banks with global reach are somehow inherently bad or more risky are wrong.  

Large institutions provide significant value to customers – in the sheer size of credits they can deliver, in the array of products and services they can provide, and their geographic reach – that smaller institutions simply cannot provide.  This unique economic value is particularly important to large, globally active U.S. corporations and contributes directly to economic growth and job creation.

There is currently sharp and appropriate focus on Europe’s ever-evolving and surprising sovereign debt crisis among market participants and global policymakers.  This crisis will undoubtedly dominate the discussions at the upcoming G20 Summit in Cannes, France over the next few days.  While the Euro zone’s troubles are certainly deserving of careful attention, I’d argue that the deliberations and potential outcomes of the Deficit Reduction Supercommittee are of equal importance.

Last Friday, President Obama signed into law free trade agreements between the United States and South Korea, Colombia, and Panama, along with the Trade Adjustment Assistance Extension for American workers displaced by international trade. The three trade agreements, negotiated more than four years ago, offer enormous opportunities for American manufacturers, service providers, and farmers.  Indeed, according to the Business Roundtable, passage of the three FTAs will create an estimated 250,000 new American jobs.  The agreements also help keep the United States competitive in the global marketplace, and ensure that the United States will no longer be at a disadvantage relative to other countries that have already signed and implemented similar agreements.