Big Bad Banks
Fri, Apr 6, 2:32 PM ET, by Bob McTeer
If the size of our largest banks had anything to do with precipitating the financial crisis, or making it worse, then it is ironic that they grew bigger during the crisis. If we are to punish them for size now, through various provisions of Dodd-Frank, and lawsuits, or even by breaking them up, as some have suggested, we should at least recall how they grew during the crisis and the public service they provided in doing so.
Bank of America, for example, acquired Merrill Lynch and Countrywide, the latter much to its sorrow given the many problems that came with it that still plague Bank of America. Chase grew, in part, by acquiring Bear Sterns and Washington Mutual, with both acquisitions supported by the government. Wells Fargo acquired ailing Wachovia. One thing these acquisitions had in common was that had they not been made by the acquiring banks, the government probably would have had to do it itself. Indeed, the government and the banking regulators encouraged and assisted these transactions, or, should I now say aided and abetted.
The case of Bank of America seems particularly unfortunate since it had buyer's remorse regarding Merrill, but was "encouraged" by the government to go through with the deal anyway. I suppose the law requires an acquirer to be responsible of the debts and deeds of the acquiree, but the alacrity with which Bank of America has been vilified, threatened and sued for the sins of others that might have been inherited by the government seems unseemly to me.
I own stock in the banks mentioned above as well as others. Large bank stocks are undervalued, you know.
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