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The banks that were supposedly too large to fail last year when the government decided to bail out crumbling banks are now bigger than they were just a year ago. Even with measures in place to try to keep banks from getting too large, somehow these banks have gotten bigger and continue to grow.

J.P. Morgan Chase holds more than $1 out of every single $10 deposit made in the United States. Big surprise, so does Bank of America and Wells Fargo. Along with Citigroup, these banks issue half of the mortgages in the country and two out of every three credit cards.

FDIC chairman Sheila C. Bair has said regarding the weight of the banks on the financial system, “It is at the top of the list of things that need to be fixed. It fed the crisis and it has gotten worse because of the crisis.”

A few problems with these banks being bigger than they once were is that:
1) Consumers will have less choice when it comes to banking services and these banks will likely take advantage of that situation.
2) The bigger the bank, the more likely it is to think that the government will prop it up if things start to go south. This could lead to more risky moves on the banks’ parts.
3) The government’s stakes in these companies is large, but it still does not have voting shares.

Of course, this all came about due to banks failing or otherwise being “too good of a deal to pass up.” Meaning, that banks like Wachovia were simply too cheap with too large of a customer base to not purchase. That’s what Wells Fargo did, and that’s what has been happening all across the banking industry. However, it does seem a bit counter productive when you start to think about it.

These banks were once too large to fail and nothing has changed it seems. The only difference is that every dollar banks are lending is being scrutinized and those who want to borrow money to buy homes or other things are also being scrutinized as hard as the banks are in some situations.

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Jeremy

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