This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Big Bank Phobia: Not Too Big to Fail

Both deals worked out beautifully for the U.S. government. The FDIC's insurance fund didn't lose a dime when selling Washington Mutual to JPMorgan Chase, which is most unusual in the aftermath of any bank failure. Former FDIC Chairman Sheila Bair helped negotiate the sale of Wachovia to Wells Fargo, possibly avoiding another bank failure that would have been 2.5 times as large as Washington Mutual, measured by total assets. Washington Mutual wound up being the nation's largest bank ever to fail, with total assets of roughly $307 billion.

JPMorgan had already grown through its acquisition of the nearly bankrupt Bear Stearns in June 2008. And Bank of America (BAC - Get Report) added purchased Countrywide Financial during 2008, increasing its mortgage business and, in hindsight, its liability, before greatly expanding its brokerage and wealth management businesses, not to mention its balance sheet, through its purchase of the floundering Merrill Lynch on Jan. 1, 2009.

So yes, the "big four" retail U.S. banks as a group have expanded their deposit market share in the wake of the crisis, although Citigroup (C - Get Report) didn't go on a buying binge.

Looking again at the big six, including Goldman Sachs (GS - Get Report) and Morgan Stanley (MS - Get Report), three grew their balance sheets over five years through the end of 2012, while three shrank. JPMorgan's total assets increased 51% over the five-year period, while Wells Fargo, grew its total assets by 147%, mainly from the Wachovia purchase. Bank of America saw its balance sheet expand by 29%. Meanwhile, Citigroup, Goldman and Morgan Stanley saw their balance sheets shrink by 16%, 15% and 25%, respectively, as part of their plans to trim underperforming business units and lower risk-weighted assets.

According to data provided by Guggenheim Securities, the big six aren't quite so big when taking into account the size of the U.S. economy. "While the median Large Cap Bank represents about 50% of their respective economies, the U.S. Large Cap Banks only represent about 15%," Mosby wrote in a report on May 13. Looking deeper, JPMorgan's assets are equal to roughly 16% of U.S. GDP, while Bank of America is at 15%, Citigroup is at 12%, Wells Fargo 9%, Goldman Sachs 5%, and Morgan Stanley's assets are equal to about 5% of U.S. GDP.
2 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
C $45.57 0.00%
BAC $14.19 -1.20%
GS $163.14 0.00%
JPM $62.56 0.00%
MS $26.89 0.00%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs