Four years ago today, President George W. Bush signed into law the biggest corporate rescue in American history. Even as U.S. unemployment has remained above 8 percent for 43 months, the country’s biggest banks are making almost as much as they ever have.
The combined $63 billion in profit reported by the six largest U.S. lenders over the four quarters through June is more than they earned in any calendar year since the peak in 2006.
Bank of America Corp. made more in the 12-month period than Walt Disney Co. and McDonald’s Corp. combined. Citigroup Inc., which like Bank of America took $45 billion in taxpayer funds from the Troubled Asset Relief Program, earned more than Caterpillar Inc. and Boeing Co. JPMorgan Chase & Co., the largest U.S. bank by assets, had profits of more than $17 billion even after reporting a $5.8 billion trading loss.
Still, Wall Street isn’t enjoying its good fortune.
Those billions of dollars in profits aren’t enough, according to interviews with more than a dozen bank executives and analysts. The lowest leverage in a decade, return on equity at a third of 2006 levels, higher capital requirements, shares trading below book value, declining bonuses, job cuts, the European sovereign-debt crisis and a backlash against bankers have damped the joys of profit, they said.
Dick Kovacevich, who retired as chairman of Wells Fargo & Co. in 2009, was in the men’s dining room of his San Francisco country club in July after the bank reported a $4.6 billion second-quarter profit.
A man there spoke to him, and not to offer praise for the best results in the firm’s 160 years.
“Wall Street was bailed out, and Main Street wasn’t,” he told Kovacevich, the 68-year-old banker said in an interview.
Wells Fargo and JPMorgan both broke profit records in 2011 and are expected to do so again next year, according to analysts’ estimates compiled by Bloomberg.
“While there are things to celebrate for the senior professionals in these institutions, sadly I don’t think they do much celebrating,” Ralph Schlosstein, chief executive officer of New York-based boutique investment bank Evercore Partners Inc., said of the biggest financial firms. “The challenge they face is how to adjust to this new capital regime, and the new regulatory regime, and to earn an adequate return on equity. None of them have yet broken the code.”