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TheStreet Open House

Obama Plan Favors Goldman, Wells Fargo

NEW YORK ( TheStreet) -- If the country's biggest banks had only the business lines that President Obama would prefer they keep, it would have taken taxpayers a lot longer to get their money back.

The president last week proposed a plan that would effectively force banks to slice off portions of their companies that in engage in capital markets activities. Instead, banks would go back to being plain-vanilla banks -- the type that take in deposits and issue loans, and give customers advice on how to make money.

But while the equity and bond markets have improved dramatically since the crisis erupted, the economy is faring much worse. About 160 of those plain-vanilla savings & loans have collapsed since September 2008, and there are over 550 more of them on the Federal Deposit Insurance Corp.'s "problem" list.

Taking a simple look at Bank of America's (BAC - Get Report) business line results last year tells the story fairly well. The only segments that operated in the black were those related to capital markets, as well as deposits. The most profitable segment happened to be global markets, which raked in a net $7.2 billion.

If Bank of America only consisted of consumer-servicing businesses -- deposits, credit cards, mortgages and wealth management -- it would have lost $4.3 billion in 2009. Instead, it earned $6.3 billion.

Of course it's difficult to tell whether all of the profit in any given segment excludes the type of business Obama would like to strip out of the banking industry. They aren't required or expected to report results in that fashion today. But the story appears similar across other large firms, perhaps with the exception of Wells Fargo (WFC - Get Report), most of whose business is related to client services, rather than investment banking, hedge fund and private equity, or proprietary trading.

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