Proposed: Merge Citibank and Bank of America


Citibank and B of A are failing, and yet are too large to fail.  The bankruptcy of either one would likely have large effects on global financial confidence.  The bankruptcy of both would be much worse.

One solution may be to merge them.  Doing so could have some benefits.  First, it would constitute a form of action where, otherwise, it is not clear that any action will be taken in the near future.  As such, it holds out at least a hope of progress through what otherwise is coming to seem like a quagmire.  This, moreover, could be a form of action that would not call for much immediate FDIC involvement, thus sparing that entity’s reserves for other purposes in the near term.

Another benefit of merger would be the creation of obvious redundancies and the consequent dismantling-without-dissolution of some of those redundancies.  Duplicative branches within a single area, for example, could be sold off.  Duplicative back-office processes could be streamlined.  Downsizing — adjustment of the business of “Citibank of America” to its financial realities — would thus take place in a relatively orderly fashion, without the drama of receivership.

The goal of such a merger would hopefully be to reorganize this mega-bank into competitive, freestanding business units that can then be spun off into distinct companies — with none exceeding a size that the FDIC will be able to cope with, in future times of difficulty.


One Response to “Proposed: Merge Citibank and Bank of America”

  1. 1 Ray Woodcock

    Another post develops these ideas further.

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