Face-Off on Stocks: Bank of America, JPMorgan Chase, Citigroup

The implosion of Lehman Brothers was just two years ago, and yet Wall Street and the financial industry are still struggling to rebuild from the ashes. Bear Stearns was the first of the Big Five investment banks to topple back in the spring of 2008, but when Lehman failed on Sept. 15 in a record-setting $690 billion bankruptcy, the industry landscape was forever changed.

Shotgun marriages and forced consolidations were one of the most immediate consequences of Lehman blowing up. Bank of America (BAC), the biggest U.S. bank by assets, bought Merrill Lynch and its vaunted Thundering Herd of brokers. JPMorgan Chase (JPM) scooped up failed Washington Mutual, once the country's biggest thrift, to vault into second place behind Bank of America (BAC). And once mighty Citigroup (C), the pioneer of the idea of the financial supermarket, partially dismantled itself under the weight of bad loans and a massive government bailout.

The fragility of economic recovery makes it tricky to say whether these banks stocks are good long-term buys or just dangerously speculative bets. For the bull and bear cases on BofA, JPM and Citigroup, see the video below:

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Its not the size of the bank...it's the way you run the bank. You make loans on solid customers that you know have a chance of paying off their loan, you don't invest in junk bonds and 'iffy' projects. When I purchased our first home, we had to put 10% of the value of the home down, prove we had good credit rating, and both of us had jobs (with provable pay stubs). I remember we also had to provide a financial statement showing all our income and all our debts. We only borrowed money two times...one for a home, and one for a used car. The rest of the money went into savings. If we could not pay cash...we did without. Much later on in life, when we accumulated some measure of wealth, we went with a bank that was small and conservative and they made money for us and when the big bust hit, they hardly felt a ripple because they had avoided all the sucker investments that came out of the government.

September 14 2010 at 1:25 PM Report abuse +4 rate up rate down Reply
1 reply to richar5795's comment

The size of the bank does not mean stability. We learned that in the collapse. To me, over stating our economic dependency on the largest banks is not the way to go. Spread the business out to the smaller guys and I bet damage would be less colossal. Monopolizing banks, especially with having government involvement is very dangerous in our capitalistic economy. Sorry big boys.

September 14 2010 at 1:11 PM Report abuse +1 rate up rate down Reply

Well Goody,you are right about a couple things.Regulating the banks is one.The party hatred crap is spewing so much crap anymore, you have to research every word.Bush advised congress to regulate the banks and FM&FM etc in sept 2003.Both parties said no.Bush pushed to regulate banks and FM&FM etc 11 times in sept of 2007.Both parties said no again.Bush tried to reform healthcare in 2007 and again both parties said no.Bush might have been republican, but once he tried to govern from the center, he lost both parties.Now Obama is giving it a go.Obama promised to go line by line in the government and cut waste.Of course he did like every other president.They only address Medicaid,Medicare,Social Security,Welfare and VA Benefits.Of course they are the programs we pay into and recieve back from.We want the president to cut the government itself.The thousands of committees created since 1918 growing our government 3,865%.For some reason they can't do that.He promised to go line by line reforming the tax system.Where corporations and ceos utilize the tax loopholes to make tax payers and shareholders pay the corporate tax.While moving our jobs overseas utilizing cheap labor while avoiding excise,export,import and duty taxes selling the same product back to the US.That costs our government a little less than 1 trillion a year.And Obama said he will not touch the free trade agreements.What the hell do you think is killing america? Bush invited more countries in and Clinton created NAFTA.China has been violating trade agreements well before 2005 by flooding world markets with their cheap crap steel and never buying one pound from us.Every new presidential elect gets the same 143 country list that says they will boycott america if a president signs any legislation at all saying Buy American.I say bring on the boycotts and let americans rebuild those factories building all the doodads like they did after the great depression.Let us drill for our own oil instead of importing 70% of it.Let's start subsidizing our new farmers to grow instead of subsidizing the 1% of wealthy farmers to not grow.Put 25% of americans back to work on our farms.Raise that tariff on imported cheap crap chinese steel that our steel mills marched on washington about in 2005.Don't give us back our country which will piss the whole world off. Let us take it back.

September 14 2010 at 12:53 PM Report abuse +2 rate up rate down Reply

my mutual funds have holdings in chase and bank of america..however i use a local bank for my personal accounts & that bank didn't want to take tarp money but govt made them then the bank gave it back as soon as it was allowed. i do have a chase rewards card which i use like a debit card so i can get cash back from them.i pay my credit card each and every month never leaving a balance so they can't charge me interest (13.9%). my local bank doesn't offer a rewards card if it would i'd use it and drop chase.

September 14 2010 at 11:58 AM Report abuse rate up rate down Reply
the aol experien

Why would anyone invest in the large banks or hold their credit cards after what they have done to us??? My money will stay in a small privately owned bank that I have researched.

September 14 2010 at 11:07 AM Report abuse +1 rate up rate down Reply
the aol experien

The U.S. market is as artificially inflated as a pair of silicone boobs.

September 14 2010 at 11:02 AM Report abuse +1 rate up rate down Reply

these institutions in my opinior are rip-off artists. i worked in international banking for 15 years. they will bleed you and everyone else to dead. banking is a cut throat business we used to say in my days. banks and the like are there o.k. to help. "themselves" . (not counting the most recent financial nightmares) and the stock market ups and downs during bushes watch. their profits sky rocket year in and year out. check the ceo's pay checks. a highway robbery if you ask me. t will continue. greed rules. check the minimun wage in this country. my godness it is to much o.k. just like that we be always digging holes. thank you

September 14 2010 at 9:17 AM Report abuse +2 rate up rate down Reply

I am not a banker of student of banking so if I am off the mark I am sure someone will correct me but I see commercial banks in their current form as an industry due for extinction. Most of the services they traditionally offer can be delivered by software (ATMs, Banking online etc). They make their money by charging us exhorbitant interest on money they don't own (while giving us a pittance for interest when we lend them *our* money). They, together with Government, have been partners in divorcing the concept of money from that of actual goods and services thus making economics incomprehensible. End of rant.

September 14 2010 at 8:58 AM Report abuse +3 rate up rate down Reply

Chase is ok, but Wells is better. They are more into the customer.

September 14 2010 at 7:40 AM Report abuse -1 rate up rate down Reply

Personally I will not do any new future business with J.P. Morgan Chase. The way they are treating their customers is criminal at the very least. I know there are hundreds of thousands if not millions of consumers the feel that way about this inept company. Please American consumer/taxpayer stay clear of this bank you will be glad you did.

September 13 2010 at 12:08 PM Report abuse +2 rate up rate down Reply