October 17, 2011
Readers of this blog will know that I am one of those deeply concerned by the consolidation afoot in our economy (e.g., “Beware the Land of the Giants…“), more particularly, in the financial sector (e.g., “Happy 9-15!“)
From Hypervocal, a powerful reminder of just how extreme the dynamic has become, “From 37 to 4: the Consolidation of Banks“…
click here to enlarge
In 1990 there were 37 major banks in America. By 1999 there were 21. Just 14 in 2003. Now, present day, there are just four. Four major banks for consumers to choose from — Citigroup, Bank of America, Wells Fargo, and JP Morgan Chase — and we’d bet good money that number will be three soon…
As HV points out, the implosion began in the 90s with the erosion of the 1933 Glass-Steagall Act, legislation designed, after the bank failures of the Great Depression, to assure that there was no repeat of that debacle; it caught fire after the passage of the 1999 Gramm-Leach-Bliley Act, which finally and fully repealed Glass-Steagall– allowing financial institutions to operate as commercial banks, investment banks and insurance companies under one cross-collateralized roof, on the theory that the banks would be too big to fail.
Well, they’re big all right. But as the events of 2008 demonstrated, they can fail… indeed, as we do our best to keep from disappearing into the sovereign debt sinkhole in Europe and try to find a road to recovery from the Great Recession, we have to hope that we haven’t created banks that are too big to save.