As Bank of America Goes, So Does the USA

As GM goes, so does the nation?

That was true for almost a century when GM dominated nation’s economy and was an icon for the American manufacturing industry.  Now, the GM has fallen into the rear-view mirror and its glory will stay only in the good memory.  After government rescue, GM seems to revive quickly using its advantage of huge size.  Its recent huge success of IPO was more or less an indication that GM maybe prosper again.  However, behind all the IPO buzzes, the true story is coming from the far away China, since all of the GM profits were actually from China market, not the deep loss from USA market.  At the bottom of the financial crisis, GM could easily shut down the entire North America production if there were no huge resistance from Unions and a pro-union US government.  The world would not notice that and even the US market would not notice that, since GM could have produced all its cars from China and other countries.

If GM is no longer irrelevant, you’d better not say “As GM goes, so does the nation” anymore.  What shall you say then?

As Bank of America goes, so does the USA!

First, size does matter.  In terms of the employment, banking industry is hiring a lot more people than the auto industry is.  The Big-Five Banks employ almost double the number of employees, i.e., 880,000, than the Big-Three Autos do, i.e., 450,000.  In addition, considering the major portions of the Big-Three Autos operations are actually outside of the US, the actual US employee numbers maybe only little more half of the total employees.  For banks, more than 90% of their operations are completely US based.

	Employment
GM	209,000
Ford	198,000
Chrysler	50,000
Big-Three Auto	457,000
BOA	284,000
Citibank	258,000
JPMorgan	236,000
Goldman Sachs	39,000
Morgan Stanley	63,000
Big-Five Bank	880,000

In terms of the corporation values, the combined market cap of all Big Three Autos is about $100 billion and that of the Big-Five Banks is a much bigger $500 billion.

Second, the Americans today can live a normal life without driving a single American car.  There are plenty of more reliable, more fuel efficient cars from Germany, Japan, and Korea to choose from.  In fact, the US Auto industry's market shares have been declining steadily in the past 20-30 years, from almost 100% to less than 50% today.  Besides, less than half of GM cars actually built outside of the USA.  In comparison, the banking industry is completely domestic.  The American moneys are deposited into the American banks and the banks are lending the money to American business and real estates, etc.  The nation will go paralyzed instantly if the Big-Five Banks go out of the business.  Bank of America has a total deposit of more than $1 trillion dollars or 15% of national total deposits.  Whereas GM is dispensable from the US economy, the American Banks are absolutely not.

Moreover, the US Banks are controlling the financial lending to the American big or small businesses, providing the fresh blood to power the US economy every day.  If these lendings stopped, the entire US economy would be put to a halt.  Can you imagine what it looks when the American economy halts and collapses?  No one wants to see that happen.

Now, you can say this again.

As Bank of America goes, so does the USA!