April 13, 2016
Federal Regulators Publicly Acknowledge That Five Big Banks Fail Credibility Test, Remain Major Threats to U.S. Economy
Statement of Bart Naylor, Financial Policy Advocate for Public Citizen’s Congress Watch Division
Note: Today, federal regulators gave failing grades to five major banks on their mandatory plans for how they would resolve their businesses in the event of insolvency, which are known as “living wills.” These banks whose proposals were deemed failing include JP Morgan Chase & Co., Bank of America, Wells Fargo, Bank of New York Mellon, and State Street.
Regulators failed to deem the living wills “credible.” That’s a welcome acknowledgment of the barren reality that these behemoths remain threats to the U.S. economy’s financial stability. Now regulators must take another brave step and order major divestitures, ideally a wholesale break-up of these institutions.
Let’s be clear: Firms such as JP Morgan Chase & Co. specialize in the reconfiguration of major businesses through mergers and acquisitions. The fact that they can’t credibly explain a rapid disposal of their own assets and liabilities in an orderly resolution emphasizes that such a task is impossible.
Public Citizen is actively pressing for mega-bank break-ups. We have advanced resolutions at JPMorgan and Citigroup that call for a break-up study. We think the regulators’ actions today support our case.