Surprise: "Too Big to Fail" is Bigger Than Ever

Much ink has been spilled over ending “Too Big to Fail,” the phenomenon whereby a few large financial institutions have grown so large and so important to the global financial system that the American government is compelled to use taxpayer money to prop them up in times of crisis.

Here’s the funny thing: Too Big to Fail is bigger than ever. The latest market share data from the FDIC shows that large banks now control 72 percent of the nation’s bank deposits, up from 68.5 percent when the financial collapse occurred in 2008.

One big institution stands out. Bank of America became the first bank in history to control more than $1 trillion in assets, the FDIC reports. That’s head-and-shoulders above the second-largest bank, Wells Fargo, with $793 billion in assets.

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Total deposits by American consumers reached $8.2 trillion so far in 2011, a 7.4 percent increase over the same period last year. As the total pie expands, the largest institutions continue to gobble up a larger proportion of it. Bank of America’s total assets grew by $150 billion, or 16 percent, over last year, the FDIC reported.

US Bancorp actually grew at a faster clip, adding $29 billion, increasing its assets by 17 percent to reach a total of $198 billion.

Such large growth by institutions that already were so big may be surprising, especially considering the recent controversy over Bank of America’s plan to begin charging customers $5 a month to use their debit cards for purchases, which prompted some consumers to close their accounts with the bank.

But signing up customers for brand-new checking accounts is not the only way a megabank can increase its assets. In 2008 Bank of America bought Merrill Lynch, which had over $56 billion in assets. In June, Capital One bought ING Direct for $9 billion, which helped the company’s assets swell a whopping 40 percent to $129.2 billion, according to the FDIC.

And actually, Bank of America’s surge into the one-member trillion-dollar club had little to do with an increase in deposits from consumers, which experienced a major decline, from $126 billion to $73 billion, over the last year. That drop was more than compensated for by increases in the bank’s securities and lending businesses, the FDIC reported.

Image: glenn mcdonald, via Flickr.com