JPMorgan Chase & Co. (JPM), Bank of America Corp (BAC), And A Key Question: Should ‘Too Big to Fail’ Be Done Away With?

Maybe a little less big

Goldman Sachs Group, Inc. (NYSE:GS) is a less traditional bank that could be impacted. Not so much a bank for the public, Goldman is more focused on investment banking than providing home loans and checking. Still, Brown and Vitter’s legislation also seeks to control how large banks can account for investments and derivatives, and that could cramp Goldman’s style and reduce its ability to make money. For investors, Goldman came through the bad times well with significant government help. But now it’s profitable – 17.94% in 2012 – and the shares grew 28.01% in the last year.

Wells Fargo & Company (NYSE:WFC) is one people know but not in the eye of the storm. By market cap, Wells Fargo is the largest bank in the US, coming in at $197.48 billion. That didn’t stop Wells Fargo from needing $25 billion or more in help during the late unpleasantness, though. The bank took $25 billion worth of stabilization money in 2008 but redeemed it by the end of 2009. More than most, Wells Fargo came through the crisis well. Still, shares recently haven’t been performing as well as some others. With a value growth of only 13.15% over the last year, it’s actually underperformed the S&P even though net profit has been 22.50%.

Coping with it all

There are many hurdles for Brown-Vitter to overcome before it can become law. Opposition pops up from other legislators who think existing law – Dodd-Frank isn’t fully implemented yet – can take care of the issue. Others seem to think that federal regulators can raise the needed capital requirements. Still, this is an issue that isn’t going away – it’s just too juicy a political target for politicians to shoot at. Best guess is that, even if the bill makes it through congress, it’ll be watered down and limit some bank lending and investment types. That’ll have a marginal effect on bank profits and activities. It should be enough to put some limit on investors’ willingness to buy bank shares, but not enough to crash them.

The article Should ‘Too Big to Fail’ Be Done Away With? originally appeared on Fool.com.

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