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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) 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) didn't go on a buying binge.

Looking again at the big six, including Goldman Sachs (GS) and Morgan Stanley (MS), 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.

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