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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

September 7, 2011 at 1:31 PM

Bank of America’s ticking sound

Two cents. That how much CEO Brian Moynihan’s head chopping added to Bank of America shares in Wednesday’s after-hours trading. For the day, it increased the stock price by 49 cents to $7.48. By comparison, JPMorgan Chase closed at $34.82, Wells Fargo at $24.96 and Citigroup at $24.98.

For my two cents, rearranging the deck chairs will not avert the titanic proportions of the disaster at the nation’s largest bank. Now, your deposits are safe because they’re federally insured (SOCIALISM!!). But the future of the Charlotte behemoth is anything but assured. We must begin to ask whether it can survive, particularly if the economy falls back into “official” recession territory.

You can bet the Federal Reserve and other regulators are awake at night asking the same thing.

If worse comes to worst, this is an opportunity to break up the first of the too-big-to-fail banks. The big money will want your tax dollars to save BofA as it is, including that indigestible meal called Countrywide Financial and all the subprime lawsuits it faces. That would be a mistake of mammoth proportions. And don’t fall for the line that it would be too complicated to dismember the institution, separating solvent from insolvent, and re-establishing the regional banks — which were already plenty big — that went into creating BofA. It can be done. All those brainos with Ivy MBAs might be released from the derivative workshop and put to some productive work for a change.

We can all hope it doesn’t come to that. Or not. The result, done right, would be a template for dealing with the other TBTFs.

Today’s Econ Haiku:

A swoon on Tuesday

Now a rally, so shout out

Volatility

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