In 16 Years, the Fed Has Approved 4,506 Bank Mergers and Denied One

By Pam Martens and Russ Martens: January 19, 2023 ~

Jerome Powell, July 14, 2021On Tuesday, Jerome Powell’s Federal Reserve once again thumbed its nose at President Biden’s antitrust directive regarding the creation of more mega banks through merger. This time around, the Fed allowed the Bank of Montreal, with assets of $834 billion, and its subsidiary, BMO Financial, to gobble up Bank of the West, based in San Francisco. Following the merger, Bank of the West is to be merged into Bank of Montreal’s subsidiary bank, BMO Harris Bank.

On Friday, July 9, 2021, President Biden released a sweeping Executive Order that warned federal bank regulators against actions that create “excessive market concentration” with specific mention of bank merger activity. One business day later, the Federal Reserve announced that it had approved another bank merger.

According to the Fed’s own data, since January 1, 2006, it has approved 4,506 bank mergers, while denying one application. (See data here and here.)

At the end of 1999, the year that President Bill Clinton’s Wall Street-friendly administration repealed the 66-year old Glass-Steagall Act – ushering in an era where Wall Street’s trading casinos could buy federally-insured banks – the number of federally-insured banks and savings institutions has collapsed from a total of 10,220 to 4,746 as of September 30, 2022 according to data from the Federal Deposit Insurance Corporation. That’s a startling decline of 54 percent in banking competition.

But the decline in the number of overall banks fails to capture the magnitude of the concentration of assets at just four banking behemoths: JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup’s Citibank. According to the September 30, 2022 report from the Federal Reserve, just four banks own $9.1 trillion in assets, or 39 percent of the total $23.6 trillion in assets owned by all 4,746 federally-insured banks and savings associations in the country.

To put it more starkly, those four banks represent just 0.08 percent of all the banks and savings associations in the United States while controlling 39 percent of the assets.

The largest bank in the United States by both assets and deposits, JPMorgan Chase, has racked up an unprecedented five felony counts from the U.S. Department of Justice for money laundering and rigging markets. Nonetheless, the Fed has allowed it to continually increase its footprint. JPMorgan Chase currently has 5,013 branch offices spread across 49 U.S. states according to the FDIC.

In short, the Fed has effectively seized control of the nation’s economic future, transferring wealth from the farms, small businesses and factory floors of America to the trading floors on Wall Street – which, not ironically, include two trading floors operated by the New York Fed. (See The New York Fed Has Quietly Staffed Up a Second Trading Floor Near the S&P 500 Futures Market in Chicago and These Are the Banks that Own the New York Fed and Its Money Button.)

This Orwellian arrangement forces the working class, in order to survive, to go deeper and deeper into debt on credit cards – which are, conveniently, owned by these same mega banks.

On April 7 of last year, Senator Sherrod Brown, Chair of the Senate Banking Committee, sent a letter to Powell and Hsu on the topic of bank mergers. Brown wrote:

“The banking system has witnessed the same steep and worrying drop in competition as other industries. Enabled by rubber-stamp merger oversight, the biggest banks have only grown bigger and consolidated their dominance—the last few years have made this trend obvious. This consolidation has enriched big bank shareholders and executives, buoyed by record bank profits. But their gains have come at the expense of consumers and small businesses with less access to low-cost financial services. The data is clear about the serious, wide-ranging harms that bank mergers impose on communities.

“At its core, consolidation hurts consumers. In the aftermath of a merger, the rates banks pay depositors go down, while the rates and fees banks charge borrowers go up. Bank branches invariably close, making it harder for consumers to access financial services in their neighborhoods. Troublingly, branch closures are usually clustered in low- and moderate-income communities. That’s why these closures often push consumers out of the banking system and, toward high-fee, predatory non-bank financial companies—like check cashers and payday lenders—that appear where branches used to be. In fact, households in communities affected by bank mergers are more likely to see debts sent to collections agencies, or to become evicted.

“Consolidation also harms small businesses. Study after study has documented how, following bank mergers, small business lending dries up and available loans become more expensive. It’s little wonder that small business formation subsequently suffers. Consolidation among banks also supports consolidation in non-financial industries, undermining small enterprises. Meanwhile, community banks that serve rural and smaller communities and support more small business lending than Wall Street banks are forced to compete on an uneven playing field with nonbank fintech companies.

“Finally, mega mergers jeopardize financial stability by creating new ‘too big to fail’ institutions. A wealth of data and evidence supports the commonsense point that larger banks pose greater systemic risks. The Federal Reserve found that the failure of a single large bank has a greater negative impact on the economy than the failures of multiple banks that are together the size of the large bank.”

Unfortunately, until there is a comprehensive and independent investigation of the scandals regularly occurring at the Federal Reserve (see here and here, for example) the U.S. will continue to lose its global competitive edge and the confidence of its citizens.

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