Two years after President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the nation’s credit markets seized up and required unprecedented bailouts by the government.  [See "Goldman Sachs Closes in on $1,000,000,000,000" in Wednesday's WHO's News.] The top 5 U.S. banks - JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs - held $8.5 trillion in assets at the end of 2011, equal to 56% of the U.S. economy - according to the Federal Reserve.  Prior to the financial crisis, the largest banks’ assets amounted to 43% of U.S. output.

And, one more factoid: The Big Five today are about twice as large as they were a decade ago, relative to the economy, which no doubt sparks concern that trouble at a major bank would rock the financial system and force more government bailouts and assisted rescues.

Eroding Faith. With Tuesday's report that Goldman's balance sheet has grown since the financial crisis, the consciousness of America's banking critics got a new "wake-up call."  [C-I Note: Goldman's assets jumped nearly 8% since 2008 to $951 billion.  For further details, click on the above WHO's News link.] President Obama's numerous critics include Federal Reserve officials, Republicans, and Occupy Wall Street supporters, all who see the concentration of bank power as a threat to economic stability.  And, as weaker firms collapsed or became dangerously unstable, the usual handful of financial giants were there ready to scoop them up, maintain their operations - benefitting shareholders and banking customers, alike - and adding them to each bank's growing global universe. It's interesting to note that the Federal Reserve reports this on JPMorgan Chase: the balance sheet for the investment bank actually shrank 5% since the financial crisis, but that statistic is masked by all of the bank's acquisitions. What to make of the growth? The industry’s evolution defies the president’s January 2010 call to "prevent the further consolidation of our financial system."  Embracing new limits on banks’ trading operations, Obama said then that taxpayers wouldn’t be well "served by a financial system that comprises just a few massive firms." Yet, banks like Goldman have been able to grow since the financial crisis, in spite of new, more stringent regulations, many of which are intended to make it inconvenient and expensive for banks to bulk up their balance sheets. Former IMF chief economist Simon Johnson blames a "lack of leadership at Treasury and the White House" for the failure to fulfill that promise.  "It’d be safer to break them up," he said. Consider This about Bank Growth - From Proponents, Opponents, and Middle of the Roaders. One camp of reformers is okay with the fact that, say, Goldman has more assets than in 2008, because the increase in capital over that period has made the bank more resistant to losses and market shocks.   Goldman also has fewer hard-to-sell, hard-to-value assets, and more liquid securities.  These proponents also note that balance sheets at both Morgan Stanley and Goldman are quite a bit smaller than their peak levels before the financial crisis. Opponents are quick to say that size remains critical, because even if a bank has higher capital and better quality assets, it can still be subject to a run.  And, if it’s huge, the taxpayer would have to step in to save it.  They urge the government to force banks to be made small enough to fail without bringing down the system. A middle camp fuses the 2 approaches.  It wants banks to be smaller over time, but it expects tougher regulations will surely, but gradually, cause that to happen over time.  For instance, once banks have to hold much higher capital against illiquid bonds and derivatives they’ll be quick to dispense with them.  This is expected to happen once global bank regulations - i.e., the Basel III rules - come into effect over the next few years. Hardliners counter by saying it’s naïve to expect capital-based regulations alone to reduce the size of banks substantially.  But that’s somewhat unfair, because new capital rules haven’t had a chance to show their effect. Yet, Notwithstanding New Regulations and Safeguards ... the government’s financial system rescue, starting with TARP in 2008, still angers millions of taxpayers - many of whom banded together under the banner of the Tea Party movement.  Banks and bailouts remain unpopular.  In a February poll conducted by the Pew Research Center, by a margin of 52% to 39%, respondents called the bailouts "wrong" and 68% said banks have a mostly negative impact on the country. Consolidation and Concentration. Notwithstanding the issues of growth, there remains no doubt that 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 FDIC.  The trend intensified during the crisis as JPMorgan acquired Bear Stearns and WaMu, while Bank of America bought Merrill, and Wells Fargo took over Wachovia in deals encouraged by the government. For further details, go to:  [Businessweek, 4/16/12].