[supercanuck]

Maybe somebody smarter than me might know more, but I think if you break up a bank, you have to sell off its assets or transfer them of some kind and currently:

1. Banks don't have to value their assets at market price (that whole mark to market issue)

and

2. Banks are currently trading below their book value, because, from what I've read, nobody really trusts the value of those assets.

So, it could in theory spark a new global panic by people shorting banks and withdrawing capital.

[bsims]

You're correct about the book value and asset quality being an issue. I don't think a run on banks would be an issue if government orchestrated (especially if not during a crisis). More than likely it would be similar to how AT&T was done previously.

http://en.wikipedia.org/wiki/Breakup_of_AT%26T

You Canadians have it figured out, your banking system seems far more efficient with larger regional institutions.