Bank of America poses “a grave threat to U.S. financial stability,” according to watchdog group Public Citizen, which has called for the bank to be broken up.
In a a petition to Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner, the advocacy group said that BofA should be broken up “into one or more institutions that are smaller, less interconnected, less complex, more manageable and, as a result, less systemically dangerous,” something that Public Citizen says the government can do under the Dodd-Frank financial reform act:
Bank of America currently poses a grave threat to U.S. financial stability by any reasonable definition of that phrase. It is the second largest bank holding company in the U.S., holds assets equal to roughly one-seventh of gross domestic product, and is highly complex and interconnected with other financial institutions.
Bank of America is too large and complex to manage or regulate properly, and its financial condition is poor and could deteriorate rapidly at any moment, potentially causing the market to lose confidence in the bank. An ensuing run on the bank could cause a devastating financial crisis.
Public Citizen also sent officials a letter urging regulators to investigate BofA and other “too big to fail” financial institutions, warning that “if any of these institutions were to deteriorate, it could threaten the U.S. financial system.” The letter was co-signed by a number of other advocacy groups and legal scholars, including Americans for Financial Reform, the Center for Media and Democracy and the U.S. Public Interest Research Group.
In a statement, David Arkush, director of Public Citizen’s Congress Watch division, warned that “if Bank of America in its current form were to fail, it would devastate the financial system. We’re asking the regulators to make sure that never happens. The only way to be sure is to reform the institution into something safer before any crisis materializes.”