While You Were Sleeping...
A death and a birth... While Wall Street and 25,000+ employees were abuzz over Lehman Brothers' unexpected tumble (the death of a revered institution), Bank of America (BOA) was busy devouring Merrill Lynch, a transaction that when complete will make BOA the largest banking institution in America, according to Slate, with arms in nearly every aspect of the financial industry (the birth of a new behemoth).It will be able to provide a bank account to save your money in, a mortgage to spend it on, a credit card to go into debt with (a debt you'll owe to them), and now, with the addition of Merrill, advice about how to invest it, combining consumer and investment banking in a way that few other financial institutions manage. It adds Merrill’s $966 billion in assets to its own already impressive $1.7 trillion!
The government refused to bail Lehman Brothers out; however, new reports state that floundering insurance giant AIG won't be as unlucky, as Uncle Sam intends to lend a hand in the form of a financial lifeline. AIG is significantly larger than Lehman Brothers, so it's understandable.
The question as one writer suggests is whether BOA will now become too big to succeed, and if, in another dozen years or less, we'll be talking about another death and another birth, as BOA falters under its own weight, and thousands of men and women, and in turn, the economy, suffer for it, as the government struggles with the decision to either let the giant fall, or save it from collapse, while the next behemoth rises to take its place, repeating the cycle.
As I've said previously on this blog, I'm all for the free market that capitalism provides us, and I'm not endorsing blanket government regulation of industry, but clearly there's a problem here that needs to be evaluated and a solution eventually reached. Surely there's a happy medium. As BOA becomes even larger, and dominant, a company with almost 300,000 employees, and $3 trillion in assets (much of it being money belonging to the customers its several factions serve), I would expect that government officials would be concerned that a repeat of what we've seen in recent weeks, and even over the last several decades, will indeed occur, with even more devastating economic consequences, warranting an intervention once again.
How about taking a cue from the now-infamous Bush Doctrine and applying it locally - preemptive measures, with the difference being strictly economic, not military? It might mean punishing an entire industry for the sins of a few, but maybe that's not such a bad idea. It'll be like a parent holding all of his/her children accountable when one of them fucks up, especially if the others looked the other way as the problem child was fucking up. Every child gets a smack on the wrist, regardless of contribution, which will then force the "innocent" ones to not only ensure that they behave as expected, but also to make sure that the child who fucked up behaves just as well, or do whatever they can to isolate him/her into obscurity!
By the way, it's worth noting that both Lehman Brothers and Merrill Lynch are among the biggest donors to the presidential campaigns of both Barack Obama and John McCain, with Lehman donating more than $370,000 to Obama's camp, and Merrill Lynch giving close to $300,000 to McCain's. Interestingly, both candidates agree, calling for tougher regulation of financial institutions!
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