Group wants Fed to break up Bank of America
A consumer advocacy group is calling for the break-up of Bank of America. They have even sent a formal petition to Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke.
Their goal is a realistic one. A law passed in July 2010 called the Dodd-Frank Act came about in reponse to the financial crisis and gives federal regulators the power to break up companies that are "too big to fail." The question is does that need to be done? And if so, would anyone in Washington have the political will to break up BofA or any other big bank?
On Tuesday night during his State of the Union address, President Obama put the banks on notice. "Because the rest of us aren't bailing you out ever again," he said. On Wednesday, the consumer advocacy group "Public Citizen" filed a petition asking Geithner and Ben Bernanke to consider dismantling Bank America.
"The too-big-to-fail banks like Bank of America have actually only gotten bigger, more dangerous and certainly no more stable," said David Arkush of Public Citizen.
Mark Calvey of the San Francisco Business Times says Bank of America is still holding on to some bad investments like Merrill Lynch and Countrywide. "I spoke to Barbara Desoer, president of Bank of America home loans. She said, 'Mark, if we had not bought Countrywide, we would probably be held up as a model bank right now,'" he told ABC7.
When it filed for bankruptcy in September 2008, Lehman Brothers reported assets of $713 billion. On Wednesday, Bank of America is the 2nd largest bank with $2.3 trillion in assets, three times larger than the biggest bankruptcy ever. "Letting them collapse would be catastrophic. Trying to liquidate them in an orderly fashion, as the law requires, might not work. There would be intense political pressure to bail out the institution and that might be what you end up seeing," Calvey said.
Bank of America CEO Brian Moynihan was at the World Economic Forum in Switzerland Wednesday. He said we're big because "We reflect the economy. We also reflect the excesses." No one knows what a possible break-up of Bank of America would look like. "It could easily go back to geographic separation again, or it can say we don't want you involved so heavily in investment banking, so pull back in that arena," Calvey said.
There is intense pressure coming from both sides of the congressional isle to act before it is too late, and some academics are also adding their names to the peition. Bank of America spokesperson Colleen Haggerty says she is aware of the petition, but the company has no comment. When Bank of America reported earning last week, CEO Moynihan said, "We enter 2012 stronger and more efficient after two years of simplifying and streamlining our company."
bank of america, federal reserve, ben bernanke, business, lyanne melendez
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