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'Too-big' banks get bigger still

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Pedestrians wait to cross the street in front of a Wells Fargo bank office on July 11, 2012 in Charlotte, N.C. Just before the financial crisis hit, Wells Fargo & Co. had $609 billion in assets. Now it has $1.4 trillion.

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By The Los Angeles Times
Saturday, Sept. 21, 2013, 9:00 p.m.
 

WASHINGTON — Just before the financial crisis hit, Wells Fargo & Co. had $609 billion in assets. Now it has $1.4 trillion. Bank of America Corp. had $1.7 trillion in assets. That's up to $2.1 trillion.

The assets of JPMorgan Chase & Co., the nation's biggest bank, have ballooned to $2.4 trillion from $1.8 trillion.

Ending the problem of so-called too-big-to-fail firms was a rallying cry for politicians and regulators after the unprecedented bailouts in fall 2008. The issue was the major impetus for enacting the sweeping Dodd-Frank regulatory overhaul two years later.

President Obama and key financial regulators said the law's reforms, many still unfinished, will prevent another financial industry rescue by reducing the chances that a mega-bank would collapse and by giving the government powers to handle one if it did.

Yet five years since the crisis, several of the nation's largest banks are even larger. Total assets at the nation's 10 biggest banking companies shot up 28 percent to $11.3 trillion as of the end of June, federal regulators said.

There is rare agreement among many Democrats and Republicans in Washington that those banks still are too big to fail, leaving the economy even more at risk.

“These banks are too big to manage, and they're too big to regulate,” said Sen. Sherrod Brown, D-Ohio. “Too-big-to-fail hasn't been fixed.”

Agreement on identifying the problem, however, doesn't mean both sides of the aisle agree on a solution. Arguments rage in Washington on an issue known simply as TBTF.

Like many Democrats, Brown believes that the new rules, including federal authority to seize and dismantle firms if their failure threatened to trigger a crisis, don't go far enough.

They want laws that could force mega-banks to downsize. If they're not too big, the argument goes, then they're not too big to fail.

Most Republicans agree the problem has gotten worse. But they don't blame the banks.

The culprit, they say, is the financial reform law, one of Obama's signature first-term accomplishments.

“Rather than ending too-big-to-fail, Dodd-Frank codified it and wrote it into law,” said Rep. Patrick McHenry, R-N.C.

The government's power to seize firms teetering near collapse could result in their being rescued instead of shut down, in effect enshrining bailouts as an option for federal officials, McHenry said.

Wall Street and investors know the public safety net is still there, and that has fueled the growth of those banks since the crisis, McHenry said.

The solution, many House Republicans said, is to get rid of that authority and make clear that any financial firm — no matter its size — would be forced into bankruptcy if in danger of failing.

 

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