As the nation slowly ground its way out of the Great Recession, the biggest banks in the country (whose malfeasance played a large role in creating the downturn) grew even larger. According to data from the Dallas Federal Reserve, the largest 0.2 percent of all banks now control nearly 70 percent of all banking assets:
As of third quarter 2012, there were approximately 5,600 commercial banking organizations in the U.S. The bulk of these—roughly 5,500—were community banks with assets of less than $10 billion. These community-focused organizations accounted for 98.6 percent of all banks but only 12 percent of total industry assets. Another group numbering nearly 70 banking organizations—with assets of between $10 billion and $250 billion—accounted for 1.2 percent of banks, while controlling 19 percent of industry assets. The remaining group, the megabanks—with assets of between $250 billion and $2.3 trillion—was made up of a mere 12 institutions. These dozen behemoths accounted for roughly 0.2 percent of all banks, but they held 69 percent of industry assets.
The Dallas Fed, led by Richard Fisher, has consistently called for the largest banks to be broken up, as have some lawmakers. “These banks are not just too big to fail, they’re too big to manage,” said Sen. Sherrod Brown (D-OH). “I think these banks will be stronger and healthier and probably more profitable if they’re smaller.”
Instead of breaking up the biggest banks, the Dodd-Frank financial reform law of 2010 attempts to wall off some of the riskiest activities in which mega-banks engage and lays out a process for unwinding failing financial firms without resorting to ad hoc bailouts. Banks are looking to water down or circumvent the former (and may sue if they don’t get their way), while House Republicans have made a concerted effort to repeal the latter. (HT: Zero Hedge)