Total assets at the six banks have more than doubled to $9.41 trillion in the second quarter from $3.75 trillion at the end of 2002 and rose 14 percent from $8.22 trillion in 2007.
On Sept. 25, the fourth anniversary of the collapse of Washington Mutual Inc., the biggest bank failure in U.S. history, the International Monetary Fund warned in a report of “risks in the financial system,” citing “the larger size of financial institutions.”
WaMu was seized by regulators and sold to JPMorgan, which also bought Bear Stearns Cos. in 2008. Wells Fargo bought Wachovia Corp. that year, and Bank of America acquired Merrill Lynch & Co.
“The people who were at the heart of the financial crisis because of their risk-taking were the ones who came out on the top,” said former U.S. Senator Ted Kaufman, a Delaware Democrat who co-sponsored a 2010 measure that would have shrunk banks.
Expensive regulation, not size, is hurting the banks and by extension the economy, according to Wells Fargo’s Kovacevich.
“We charge our customers more, and still our returns are low,” said Kovacevich, who served as the bank’s CEO from 1998 to 2007. “The industry has to extract from the marketplace higher levels of profits, which is an expense to the marketplace, to get still-record-low returns on equity. Is that good for the economy? No.”
At the country club, where he said he golfs twice a week and prefers the Cobb salad, he answered the bailout remark. He told the man that his bank didn’t want the $25 billion it took from TARP and that it repaid the loan with interest.
The conversation ended there.
“Now, if he would’ve argued about it,” Kovacevich said, “I probably would have got a little more animated.”