Break Up Bank of America
Frequently Asked Questions
Q: What is “too big to fail”?
A: When we say a financial institution like Bank of America is “too big to fail,” we mean that the institution is so large and interconnected with the financial system that its failure could trigger an economic crisis. Instead of allowing such a firm to fail and cause a crisis, it is likely that the federal government would consider using taxpayer money to bail out the bank, as it did with many institutions in 2008. Essentially, this means that our economy – and U.S. taxpayers – are held hostage by “too big to fail” banks like Bank of America.
Q: What do you mean regulators should do when you say they should “break up” Bank of America?
A: We mean that Bank of America should be reformed into smaller, simpler and safer financial companies — companies that are not “too big to fail.”
Q: Will consumers with accounts at Bank of America lose their money if the bank is broken up?
A: There’s no danger for depository accounts of less than $250,000 because they are insured by the Federal Deposit Insurance Corporation (FDIC).
While there may be some risks to non-insured accounts if serious mistakes occur during the break-up process, these risks are likely much smaller than the risks that currently exist to those accounts and to our economy by allowing the bank to operate in such a massive, unstable and unsustainable form.
Customers who have mortgages with Bank of America should not be adversely affected if the company is broken up. While it is possible that customers’ mortgages may be sold to another institution, the terms of those mortgages should not change.
More than likely, breaking up Bank of America would add value to the company and the economy, possibly in the hundreds of billions. This would be great for consumers, investors and the overall economy.
Q: Will the people who work at Bank of America lose their jobs if the bank is broken up?
A: In its current form, Bank of America is aggressively cutting jobs. Bank of America has promised to lay off approximately 30,000 members of its workforce in the next several years. And media reports indicate that the bank plans to close approximately 750 of its 5,700 branches.
If Bank of America were broken up and reformed, it could add value to the company. This added value would give the bank an opportunity to halt its destructive cost-cutting measures and perhaps even create jobs.
Q: Who has the authority to break up Bank of America?
Section 121 of the Dodd-Frank Wall Street Reform and Consumer Protection Act gives federal financial regulators the authority to break up banks that pose a “grave threat” to financial stability.
The Federal Reserve decides whether a bank poses a grave threat. Once it makes that determination, the Federal Reserve and the Financial Stability Oversight Council (FSOC) have broad authority to fix the problem, including authority to break up the bank. The FSOC is a group of top financial regulators, including the directors of the Consumer Financial Protection Bureau, Securities and Exchange Commission, Commodity Futures Trading Commission, and so on. Visit FSOC’s official website for more details.
Q: Why focus on Bank of America? There are other “too big to fail” banks.
We focused our efforts on Bank of America because, according to publicly available information, it is in the worst shape compared to other too big to fail banks. To be sure, the analysis that we used in the petition would likely apply to other “too big to fail” banks. But we think breaking up Bank of America is the best place for the regulators to start.
Other U.S. financial institutions that are “too big to fail” include Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo.