Angering Taxpayers
The government's financial system rescue, beginning with the 2008 Troubled Asset Relief Program, angered millions of taxpayers and helped give rise to the Tea Party movement. Banks and bailouts remain unpopular: By a margin of 52 percent to 39 percent, respondents in a February Pew Research Center poll called the bailouts "wrong" and 68 percent said banks have a mostly negative impact on the country.
The banks say they have increased their capital backstops in response to regulators' demands, making them better able to ride out unexpected turbulence. JPMorgan, whose chief executive officer, Jamie Dimon, earlier this month acknowledged public "hostility" toward bankers, boasts of a "fortress balance sheet." Bank of America, which was about 50 percent larger at the end of 2011 than five years earlier, says it has boosted capital and liquidity while increasing to 29 months the amount of time the bank could operate without external funding.
"We're a much stronger company than we were heading into the crisis," said Jerry Dubrowski, a Bank of America spokesman. The bank says it plans to shrink by year-end to $1.75 trillion in risk-weighted assets, a measure regulators use to calculate how much capital individual banks must hold.
No Limits
Still, the banking industry has become increasingly concentrated since the 1980s. Today's 6,291 commercial banks are less than half the number that existed in 1984, according to the Federal Deposit Insurance Corp. The trend intensified during the crisis as JPMorgan acquired Bear Stearns and Washington Mutual; Bank of America bought Merrill Lynch; and Wells Fargo took over Wachovia in deals encouraged by the government.
"One of the bad outcomes, the adverse outcomes of the crisis, was the mergers that were of necessity undertaken when large banks were at risk," said Donald Kohn, vice chairman of the Federal Reserve from 2006-2010. "Some of the biggest banks got a lot bigger and the market got more concentrated."
In recent weeks, at least four current Fed presidents -- Esther George of Kansas City, Charles Plosser of Philadelphia, Jeffrey Lacker of Richmond and Richard Fisher of Dallas -- have voiced similar worries about the risk of a renewed crisis.
Clear Danger
The annual report of the Federal Reserve Bank of Dallas was devoted to an essay by Harvey Rosenblum, head of the bank's research department, "Why We Must End Too Big to Fail -- Now"
A 40-year Fed veteran, Rosenblum wrote in the report released last month: "TBTF institutions were at the center of the financial crisis and the sluggish recovery that followed. If allowed to remain unchecked, these entities will continue posing a clear and present danger to the U.S. economy."
The alarms come almost two years after Obama signed into law the Dodd-Frank financial-regulation act. The law required the largest banks to draft contingency plans or "living wills" detailing how they would be unwound in a crisis. It also created a financial-stability council headed by the Treasury secretary, charged with monitoring the system for excessive risk-taking.