Top Firm Said Under Pressure To Break Itself Up


Fox Business News's Charlie Gasparino has reported that Bank of America is coming under 'increasing pressure' from US government and regulatory officials to break up the empire, as it is thought to be still much 'too big to fail'.

The bank, however, has issued a statement denying the suggestion, saying: 'We are comfortable with our integrated banking model as it exists today, and don't see any likely outcome to the regulatory reform discussions that would significantly affect our ability to keep operating as we are today'.

With Citi CEO Vikram Pandit telling a US Congressional Panel earlier this month that: 'We are selling 40% of the company. We are breaking it up', however, some commentators feel that BofA's board is simply burying its head in the sand if it thinks this issue will go away.

One banker told Here Is The City: 'Don't be fooled into thinking that 'too big to fail' is a dead issue. It isn't. Although cynics point to the fact that, 18 months after the bankruptcy of Lehman, we haven't resolved this dilemma, US lawmakers and regulators are determined to shrink the size of their mega-banks'. And a quick way to resolve the Bank of America 'size' issue would be to simply spin off the investment banking and capital markets businesses - something which would no doubt also be popular with Merrill Lynch staff.

Having said all this, there's also the Jamie Dimon 'problem' to deal with. Although JPMorgan Chase is seen as a stronger organisation, with a better balance sheet than either Bank of America or Citi, Dimon's firm has got bigger in the last two years too, acquiring the likes of Bear Stearns and Washington Mutual at the behest of the US government.  And it will be interesting to see how US authorities view JPMorgan Chase in the 'too big to fail' scheme of things. 

In the meantime, with Citi shrinking, Bank of America could find itself next in the firing (or shrinking) line.

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