Big Banks’ Growing Dominance

This is contrary to much of the rhetoric at the time, but also fairly predictable. David Cho in the Washington Post “Banks ‘Too Big to Fail’ Have Grown Even Bigger”:

J.P. Morgan Chase, an amalgam of some of Wall Street’s most storied institutions, now holds more than $1 of every $10 on deposit in this country. So does Bank of America, scarred by its acquisition of Merrill Lynch and partly government-owned as a result of the crisis, as does Wells Fargo, the biggest West Coast bank. Those three banks, plus government-rescued and -owned Citigroup, now issue one of every two mortgages and about two of every three credit cards, federal data show.

A year after the near-collapse of the financial system last September, the federal response has redefined how Americans get mortgages, student loans and other kinds of credit and has made a national spectacle of executive pay. But no consequence of the crisis alarms top regulators more than having banks that were already too big to fail grow even larger and more interconnected.

You could see making a case for creating a system dominated by a handful of giant players. That’s essentially what they have in Canada, and their system held up much better than most during the crisis. But the flipside of that is that Canada’s large banks are more tightly regulated in terms of leverage and risk-taking than American banks. We seem to be mostly just consolidating while offering one-sided semi-guarantees with no meaningful new regulations. Prudence alone should keep a new crisis at bay for a little while, but basically as best one can see we’re setting ourselves up for another round of boom and bust.