For starters, the party blames everyone but themselves for the financial crisis that led the nation's largest banks being bailed out through the Troubled Assets Relief Program (TARP), saying that "banks on Wall Street played by different rules than businesses on Main Street and community banks."
The Democrats conveniently leave out the fact that 454 U.S. banks and thrifts have failed since the beginning of 2008 and most of these were community banks participating in the real estate bubble. Further, a great majority followed the lending guidelines of Fannie Mae (FNMA) and Freddie Mac (FMCC), as the two mortgage giants continually lowered their credit standards at the behest of Democrats -- and, of course the Republicans -- in the name of making housing "more affordable."
Rather than making housing more affordable, they honorable members of Congress made it easier for mortgage borrowers to get in way over their heads, along with the nation's community banks.The Democrats also say are "ending taxpayer-funded bank bailouts and the era of 'too big to fail.'" While this may be a laudable goal, it plays as if the Democrats didn't support the TARP, which was signed into law by President George W. Bush in October 2008, after the revised Emergency Stabilization Act of 2008 was passed, with the majority of Democrats in the Senate and the House of Representatives supporting the bailout. As far as ending "too big to fail," there's no question that the Dodd-Frank banking reform legislation, together with the Basel III capital standards, will strengthen banks' abilities to absorb loan and investment losses, the type of crisis that destroyed Lehman Brothers is a liquidity crisis, which legislation can neither foresee nor prevent. Meanwhile, the big banks are bigger than ever. According to a table prepared by SNL Financial and cited by the Wall Street Journal last week, the "big four" U.S. Banks -- including JPMorgan Chase (JPM), Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) -- have a larger combined market share than they did ten years ago. The SNL data is limited to bank holding companies with deposits funding at least 25% of total assets.
- JPMorgan Chase had $2.3 trillion in total assets as of June 30, nearly tripling in size over the past ten years, including the purchase of the failed Washington Mutual from the Federal Deposit Insurance Corp. in September 2008, the fire-sale purchase of Bear Stearns in March of 2008, which was brokered by the Federal Reserve. Among the largest 50 U.S. banks, JPMorgan had an 18.33% share of assets as of June 30, increasing from 12.51% in June 2002.
- Bank of America had $2.2 trillion in assets as of June 30, also more than tripling its balance sheet from ten years earlier. The company is at the forefront of the legacy mortgage mess, from its disastrous purchase of Countrywide Financial in July 2008. In the wake of the Lehman Brothers bankruptcy, Bank of America also acquired Merrill Lynch in September 2008. The company's share of total assets among the largest 50 U.S. banks increased to 17.31% as of June 30, from 10.89% in June 2002.
- Citigroup had $1.9 trillion in total assets as of June 30, more than doubling in size from 10 years earlier. Citigroup's TARP bailout was unusual among the largest banks, as the government's preferred stake in the company was converted into common shares, which were later sold by the U.S. Treasury. Citi's share of assets among the top 50 U.S. banks declined to 15.34% as of June 30, from 18.08% ten years earlier, according to SNL Financial.
- Wells Fargo had $1.3 trillion in total assets as of June 30, which was nearly four times as large as the company's balance sheet was 10 years earlier. The company more than doubled in size when it acquired Wachovia late in 2008, after the Charlotte, N.C. lender's liquidity crisis forced the FDIC to broker a sale to Citigroup, which Wells Fargo later trumped with a higher bid. Wells Fargo's share of assets among the top 50 U.S. banks was 10.70% as of June 30, increasing from 5.76% in June 2002.
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