The $4 billion error, which forced Bank of America to resubmit its proposals for raising its dividend and buying back shares Tuesday, gave further fuel to big bank critics who say large financial institutions need to be broken up.
The error follows closely on the heels of Citigroup's (C) discovery of fraud in its Mexican lending business, a factor which may have contributed to the bank seeing its capital plan rejected by the Federal Reserve. Those mistakes are only the latest in a litany of post-crisis problems, including the JPMorgan Chase (JPM) "London Whale" trading debacle, that are regularly cited by proponents of bank breakups.
Those proponents include not just academics and politicians such as Sen. Elizabeth Warren (D., Mass.), but also observers who are much closer to the industry, such as financial services-focused investment bank Keefe Bruyette and Woods (KBW).
A recent KBW report argued investors in the largest banks would benefit from a breakup, but executives are incentivized to remain large because it allows them to reap bigger compensation packages.
Bank of America Tries to Bounce Back From $4B Capital Blunder