Democrats Have a Big Bank Problem: Street Whispers

That's a combined market share of nearly 62% for the "big four" among the largest 50 U.S. banks with deposits funding at least 25% of the balance sheet, increasing from just over 47% ten years earlier.

So the "big four" are still way too big to fail, and despite the great strengthening of their capital ratios, while also repaying the government, we would be in the same pickle, bailing out the banks again, in the event of a serious liquidity crisis.

Meanwhile, Fannie Mae and Freddie Mac are operating under government conservatorship, having receiving over $189 billion in taxpayer money so far, while continuing to purchase the great majority of newly originated single-family mortgage loans. They are also too big to fail, and with neither major party wanting to be seen cooperating with the other, it will be a tall order to see Washington come up with a plan for the government to stop being the nation's main mortgage lender.

The GOP platform is also chock full of financial platitudes.

The Republicans also bash the bailout that most of them supported, saying in the GOP platform that "the public must never again be left holding the bag for Wall Street giants, which is why we decry the current Administration's record of over-regulation and selective intervention, which has already frozen investment and job creation and threatens to make financial institutions the coddled wards of government."

The GOP says that "banks need to know that they could be at risk, and investors need clear rules that are not subject to political meddling." This is all fine and good, however, the words don't protect the U.S. economy from the dire effect a liquidity crisis could have on the nation's banks and the flow of commerce.

It's fun and easy for politicians to bash Wall Street and the banks, while patting themselves on the back for complicated "reform" legislation, but there's no denying that the big banks have gotten much bigger, that the mortgage lending market is overly concentrated, to the point that most community banks issue mortgage loans in a uniform manner dictated by the government.

The specter of a liquidity lockup in the midst of an unanticipated economic crisis is still out there. There will be more bank bailouts, no matter what the two parties say.

-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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