Five months ago, Warren Buffett's Berkshire Hathaway
On a recent foray through the Federal Reserve's public database, however, I stumbled upon data that potentially sheds light on the decision. As you can see in the table below, the size of the four largest banks in the United States, in terms of consolidated assets, has exploded relative to the next largest banks in the country. Much of this was the result of frenzied takeovers in the darkest of days four years ago: Wells Fargo
Consolidated Assets -- September 2011 (in Millions)
Consolidated Assets -- September 2006 (in Millions)
|Bank of America||$1,466,417||$1,185,581|
|Bank of New York Mellon||$251,529||$91,155**|
Source: Board of Governors of the Federal Reserve. *These assets refer to National City Corp., which was acquired by PNC Financial in 2008. ** These assets refer to Bank of New York, prior to its merger with Mellon Financial Corp. ***These assets refer to Commerce Bancorp, which merged with TD Banknorth in 2007 to form TD Bank.
A table like this raises the question: Did moral hazard play a role in Berkshire's decision? While nobody knows the answer to this -- and moral hazard may have been totally irrelevant given the favorable terms of the deal -- it seems certain that the four largest U.S. banks are no longer too big to fail. They are now way too big to fail. Indeed, call me unimaginative, but I no longer see any reasonable way to unwind these banks in an orderly manner should a future crisis require it.
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