Must Bank of America shrink?

There's a been a lot talk about too-big-to-fail banks, risk management (risk management news), systemic threats and what the Fed and other regulators ought to do. But there's apparently a simpler solution: Force banks to shrink. According to Fox Business News, regulators have told Bank of America (NYSE: BAC) CEO Brian Moynihan (Brian Moynihan news) that he must take steps to reduce the size of the bank. This has apparently been interpreted as a mandate to sell assets.

We're assuming that both Citigroup (NYSE: C) and Bank of America have been prevailed upon in this regard. But was there any talk of the qualitative aspects of any downsizing? The sheer heft of the commercial banking operations themselves are, unto themselves, not a huge worry. Much more worrisome than the somewhat staid business of traditional deposits-and-loans banking is the trading and investment banking businesses.

Getting smaller is one thing, but how you do it is another. I would think that paring back on hedge funds (hedge fund news) and alternative investment (alternative investment news) operations would be looked upon favorably. But Bank of America was never really into that business. Would the Volcker Rule make a lot more sense as an anti-systemic threat measure? 

For more:
- here's the FBN article

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