Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Chart: Too Big to Fail Has Failed – Bank of America Corp (BAC), Citigroup Inc. (C), Wells Fargo & Co (WFC), JPMorgan Chase & Co. (JPM)

Editor’s Note: Related tickers: Bank of America Corp (NYSE:BAC), Citigroup Inc. (NYSE:C), Wells Fargo & Co (NYSE:WFC), JPMorgan Chase & Co. (NYSE:JPM)

The landscape of the banking industry has changed dramatically over the last 30 years. Prior to the 1980s, it was dominated by lenders that were strictly limited by federal and state laws against interstate banking. As the deregulatory fervor of the Reagan era took hold, however, these restrictions were systematically eliminated, igniting the creation of regional banks. The largest of these then began joining forces in the 1990s to create the first truly national banks. After further restrictions were removed in 1999, they began supplementing their traditional banking activities with the trappings of investment banks.

The justification all along has been twofold: First, paid industry lobbyists convinced legislators on both the state and federal level that regulations were unnecessary because bank executives would never behave in a way that would put the now-gargantuan institutions or the economy at risk. It should go without saying that this justification is no longer viable. And second, that greater size offered greater economies of scale, and thus cheaper products for consumers and presumably better returns for investors. It’s the purpose of the following chart to dispel this notion:

Source: Yahoo! Finance.

As you can see, from an investment perspective, the nation’s four largest banks by assets — JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corp (NYSE:BAC), Citigroup Inc. (NYSE:C), and Wells Fargo & Co (NYSE:WFC) — have been far from the best performers over the past dozen years. Even the top performer, Wells Fargo, is still far outdone by smaller rivals like People’s United Financial, Inc. (NASDAQ:PBCT) and East West Bancorp, Inc. (NASDAQ:EWBC). In fact, had you invested your hard-earned money in either Bank of America or Citigroup at the beginning of the year 2000, you’d have 22% and 85% less today, respectively — and that’s excluding the impact of inflation.

Has too big to fail failed? Yes. I don’t think there’s any way to get around that. But does that mean it’s going away? Probably not.

The article Chart: Too Big to Fail Has Failed originally appeared on and is written by John Maxfield.

John Maxfield owns shares of Bank of America Corp (NYSE:BAC). The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup Inc. (NYSE:C), and Wells Fargo & Co (NYSE:WFC).

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.