Some banks are too big to fail, whether we like it or not. We learned this in the Great Depression, when bank failures transformed an otherwise ordinary recession into a decade-long economic cataclysm that didn't end until World War II.
This lesson still holds true today, as evidenced by the government's 2008 bailouts of Citigroup (C 1.77%) and Bank of America (BAC 1.94%), and to a much lessor extent JPMorgan Chase (JPM 1.94%) and Wells Fargo (WFC 1.64%), among others. Citigroup and Bank of America alone received more than $3.8 trillion worth of assistance, split between capital injections from the U.S. Treasury Department and loans from the Federal Reserve.
Bank |
Total Assistance from the Federal Reserve* |
---|---|
Citigroup |
$2.5 trillion |
Morgan Stanley (MS 2.43%) |
$2.0 trillion |
Bank of America |
$1.3 trillion |
Goldman Sachs (GS 2.23%) |
$814 billion |
JPMorgan Chase |
$391 billion |
Wells Fargo |
$159 billion |
Post-crisis regulations have ostensibly eliminated the concept of too big to fail by requiring the nation's biggest banks to submit to annual stress tests and prepare contingency plans in the event that they once again find themselves on the brink of insolvency. Eight banks bear the brunt of the new rules in particular, including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo. To see the four other firms that make the list, and to learn what makes a bank too big to fail in the first place, simply scroll through the brief slideshow below.