Too Bigger to FailThere can be no argument that the regulatory regime needed to be beefed up, with supervision of banks and other systemically important financial firms taking an all-encompassing risk-based approach, with the regulators being better-funded, and with the dysfunctional Office of Thrift Supervision being rightly folded into the OCC. But Dodd-Frank does not end "too big to fail," and having stronger capital ratios will not prevent another financial crisis of some type causing a liquidity lockup. An immediate shortage of liquidity -- not capital -- is what drove the Federal Reserve-brokered fire sale of Bear Stearns to JPMorgan Chase in March 2008, and the bankruptcy of Lehman Brothers. While the next financial bubble is not likely to be in U.S. residential real estate, human nature causes market bubbles to occur again and again, and with the large banks controlling an even larger portion of the U.S. banking market than they did before the crisis, sooner or later the government will face another Faustian bailout bargain. According to a table prepared by SNL Financial and recently cited by The Wall Street Journal, the largest four U.S. banks have a larger combined market share than they did 10 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 10 years, including the purchase of the failed Washington Mutual from FDIC in September 2008, and the purchase of Bear Stearns in March of 2008. 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% 10 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 push 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.