Public Citizen Calls For Breakup Of Bank Of America

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.”

Public Citizen to Financial Regulators: Bank of America Poses a Grave Threat to U.S. Financial Stability, Should Be Broken Up [Press Release]

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  1. Remmy75 says:

    Their response would be, we are too big to break up!

    • HomerSimpson says:

      Actually more like “Hey, don’t you have a mortgage we’re foreclosing on? No? Well maybe we need to fix that!”

  2. Costner says:

    So they are basically saying the reason they went after the second largest bank holding company in the U.S. rather than the largest is because BOA is unstable?

    I hate to break it to them, but in our current economic and regulatory climate, every bank in the US is unstable. Might as well call to break up any bank that holds more than $20B in assets.

    I’m all for a written policy that says if a bank fails the government won’t bail them out, but I’m not sure breaking them up is the answer. What would make them stop at banks… why not break up GM for being the world’s largest car company or break up Apple for having an effective monopoly on MP3 players. Break up Microsoft because of their control over office productivity software, and break up Monsanto because of their grip on the food supply.

    Where does it stop? This seems more like a politcal move simply beacuse banks are unpopular at the moment.

    • valkyrievf2x says:

      True as that might be, it isn’t the same. If Apple falls, we’ll be out ipods and the like. Annoying, but it isn’t life or death. If BoF goes, homes/mortgages/business loans (and whatever else they have their hands on). It would degenerate into chaos. Since they are the biggest, they have the biggest impact on the economy. Business that operate with a line of credit from BoF would cease operations since the bank isn’t there anymore. Look at the damage GM failing would have done to the economy. BOF is just as involved if not more than GM was to the general life of Americans. It would be catastrophic.

      On the other hand, maybe regulators wouldn’t have let BoF get that big to begin with. Similar to AIG. If the company is so big that its failure would cause the sinking of the economy, it should be imposed limits. And definitely no bail outs!

    • Loias supports harsher punishments against corporations says:

      Try to recall why they are unpopular at the moment.

    • MeowMaximus says:

      “I hate to break it to them, but in our current economic and regulatory climate, every bank in the US is unstable. Might as well call to break up any bank that holds more than $20B in assets.”

      OK! Lets do this, and require that no bank holding companies may be formed, either.

  3. Marlin says:

    How about citibank and several others join that list as well.

  4. Remmy75 says:

    Their response would be, we are too big to break up!

  5. RandomHookup says:

    Couldn’t they have brought this up while they were gobbling up other banks that had gobbled up even more banks?

  6. Nidoking says:

    They’d be happy to split into several smaller entities, once the government has paid the $5B breakup fee, the $3.5B management restructuring fee, the $800M paperwork fee…

    Besides, caps on fees probably only apply to one section of the bank. Ten sections means ten times the fees!

  7. dicobalt says:

    If they did it with BOA they would need to do it with all large banks. It does have an interesting advantage when you think about breaking the banks into different divisions such as home loans, auto loans, personal, business, etc… It forces each unit of the bank to operate at a profit and do proper business all by itself. Otherwise you have one department of the bank draining off another department of the bank thus causing too much dependance on the one successful department of the bank.

    • Bsamm09 says:

      Wouldn’t that make a lot of banking products and services more expensive or eliminated?

      • KyBash says:

        Stellar departments has to carry part of the overhead for underperforming departments, so they have to charge higher fees than they have to.

        A long, long time ago, I asked the head of a mortgage company why their interest rates and late fees were always a little lower than the bank’s. He said it was because they didn’t have to bail out a personal loan department or pay for big-corporate management.

        If a big bank is broken up, I’d expect some of the new entities to charge higher fees, others would charge lower fees. It’d probably be a wash.

  8. smartmuffin says:

    I wonder if they’re going to call for the breakup of the federal government for the same reasons.

    • AcctbyDay says:

      +1. Or reduction, whatever.

    • KyBash says:

      We lost that battle in 1865.

      (Before that, states were supposed to manage their own affairs, with the Fed being merely an overseer and provide a framework for foreign contact.)

  9. jsweitz says:

    Who is John Galt?

  10. 420greg says:

    If all the money people sent to BofA every month for mortgages and credit cards payments, etc. Stayed home and people spent it on food, shopping, entertainment, wouldn’t that help the economy? Isn;t someone former $1200 a month better spent around town then sent to BofA and ending up as some CEO’s xmas bonus?

    • lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

      You know there is that little issue of paying back money you promised to pay back when you borrowed it. Even though BofA is the devil’s spawn, when people signed mortgage paperwork and accepted credit card terms, they did sort of promise to pay back the money.

  11. BuriedCaesar says:

    Would it help the breakup effort if we started calling them “Ma Banks”…?

  12. coffee100 says:

    How about just re-establishing Glass-Steagall? How about listening to people like Brooksley Born in the future? How about not allowing loans to be granted where the income section is left blank?

    There’s plenty of ways to prevent stupid from happening. Basically when someone who knows better says “this is stupid,” they aren’t ignored.

  13. oldwiz65 says:

    BofA owns too many congressmen for this to happen. Plus it pays enough on the side to the regulatory agencies.

  14. Buckus says:

    But…job creators!

  15. gman863 says:

    1. Break BoA up into six or seven smaller banks.

    2. Watch as seven merges into three, then three into one.

    It worked for AT&T.

  16. SoCalGNX says:

    Where do I sign up to have this happen? This bank has no accountability to its customers at all and makes it impossible to get a resolution for most problems.

  17. dush says:

    MOAR govt intervention!!

  18. DragonThermo says:

    The Federal Reserve is bigger than BoA. The Federal Reserve can do a lot more damage than BoA can on their own. Why not start with the big dog, as it were, and break up the Federal Reserve into, say, twelve parts. If BoA is still bigger than an individual Federal Reserve region, then we can re-address the break up of BoA for the sake of breaking up BoA.

    Then again, the Federal government, not including the parts that are Constitutionally mandated, like he courts and military, is waaaayyy too big and way too powerful. The Federal gov’t can cause a whole lot more damage than BoA could ever possibly imagine to cause.