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The biggest U.S. banks created more than 10,000 subsidiaries in the past 22 years as they expanded, using legal structures to pay lower taxes and escape tighter regulation, according to a Federal Reserve study.

JPMorgan Chase & Co., the largest U.S. lender, has the most units at 3,391, followed by Goldman Sachs Group Inc., Morgan Stanley and Bank of America Corp. with more than 2,000 each, the study by the Federal Reserve Bank of New York shows. Citigroup Inc., the third-largest lender, has 1,645.

Critics including Thomas Hoenig, a Federal Deposit Insurance Corp. board member, say the biggest firms are too complicated to manage. The 2010 Dodd-Frank Act asked the FDIC and Fed to make sure the largest banks, if they get into trouble, can be wound down without collapsing the rest of the financial system. U.S. Senator Sherrod Brown has proposed legislation to force their breakup.

“When regulators are left to curtail the risk of trillion-dollar megabanks with hundreds of affiliates, we know that too big to fail is also too big to manage” said Brown, an Ohio Democrat and member of the Senate Banking Committee.

The 1999 repeal of the Depression-era Glass-Steagall Act was the main catalyst for the biggest banks getting bigger, the Fed study concluded. The assets of the largest lenders have since tripled to $15 trillion. Hoenig has called for reinstating Glass-Steagall, which separated investment and commercial banking, while Brown’s proposal would limit asset size.

Legal Status

Morgan Stanley and Goldman Sachs, whose main business is investment banking, have thousands more subsidiaries than some of their bigger peers, who focus more on commercial and consumer lending. The two New York-based firms changed their legal status to bank holding companies during the height of the financial crisis in 2008 to access unrestricted Fed funds.

Goldman Sachs and Morgan Stanley each have about 3,000 legal units, more than double the 1,366 entities controlled by Wells Fargo & Co., according to the Fed study. San Francisco-based Wells Fargo has roughly 40 percent more assets than Goldman Sachs and 75 percent more than Morgan Stanley.

MetLife Inc., an insurer that also operates as a bank holding company, has 163 subsidiaries. Birmingham, Alabama-based Regions Financial Corp., the 10th-largest U.S. lender by deposits, has 40.

The subsidiaries in the Fed study include the banks’ overseas units. For Morgan Stanley, Goldman Sachs and New York-based Citigroup, about half the legal entities are based outside the U.S. At JPMorgan and Charlotte, North Carolina-based Bank of America, the ratio drops to below a quarter.

Living Wills

Earlier this month, the largest lenders submitted blueprints to regulators explaining how they could be dismembered without bringing down the rest of the financial system. Dodd-Frank authorized the FDIC to use these so-called living wills to determine whether the biggest banks need internal restructuring -- such as ring-fencing some units with separate capital pools backing them -- to ensure that their dissolution would be orderly in case they fail.

The law also gives the agency power to request that a bank divest some businesses when the lender’s weak financial situation poses a systemic threat. It’s harder for regulators to use such powers to scale back the largest financial firms than specific laws that would disassemble them, such as Glass-Steagall, Hoenig said.

“In good times, it’s very hard to break them up,” he said in an interview last month. “Anything but very bad times, it’s very hard to justify the breakup because it requires the presumption that they will bring the system down. That’s a very significant judgment.”