Big Banks: Now Even Too Bigger to Fail

Two years after President Barack Obama vowed to eliminate the danger of financial institutions that are too big to fail, the nation’s largest banks are bigger than they were before the financial meltdown. Five banks—JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs—held more than $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to the Federal Reserve. That’s up from 43 percent five years earlier.

The Big Five today are about twice as large as they were a decade ago relative to the economy, meaning trouble at a major bank would leave the government with the same Hobson’s choice it faced in 2008: let a big bank collapse and perhaps wreck the entire economy or inflame public ire with a costly bailout. “Market participants believe that nothing has changed, that too-big-to-fail is fully intact,” says Gary Stern, former president of the Federal Reserve Bank of Minneapolis.