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America will soon see a wave of bank mergers?

economist.com

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Re: America will soon see a wave of bank mergers?

#41

Post by mattbrewsbytes »

theseatoms wrote: post #13
Mistletoe wrote: post #4

Earlier quoted context omitted.

Am I too tinfoil hat to think the big 4 planned it like this all along? I guess one could ask why WOULDN’T they have meetings trying to engineer exactly what is happening?

If I had to guess, it's less so "planned" and more so that the various institutional and regulatory incentives make this sort of outcome extremely likely.

I think this hits the nail on the head. I think after 2008 they setup a system (set of regulations/rules/policies not some group of monocle wearing dudes in a room scheming) where the BigBanks will eat the SmallBanks, the FDIC will insure what they do and some Federal agency will eat the SmallBank failures and then BigBank can swoop in as a "savior" essentially consuming SmallBank but all that is left is the profitable parts at that point.

Use a local credit union instead of a bank.

Re: America will soon see a wave of bank mergers?

#42

Post by RGamma »

wesapien wrote: post #16
cyclecount wrote: post #2

All of the rules put in place after 2008 are being ignored; the number of banks in the US pre-2008 financial crisis was about 31k. Now there are close to 3000. After this wave of mergers, there might be around 1000! And a few will be so large that they can make insane bets, betting on risky and novel new investment vehicles that will (maybe initially) pay off handsomely before ultimately failing dramatically. This wi…

You guys should be flipping cars when bank execs didn't get jail time for the financial crisis

America does not seem to be a place of collective action (anymore?). Instead everybody is blaming themselves and each other, fuelling a mental health crisis and social malaise. It's not pretty to watch.

Re: America will soon see a wave of bank mergers?

#43

Post by Semaphor »

lmpdev wrote: post #3

I know there are regulatory rules which partially explain the fragmented banking sector in the US compared to other nations: four example in Australia we only really have 4-5 proper banks Are there other reasons that small banks have seemed to thrive in the United States but no where else?

> but no where else

AFAIK we are also an outlier, but Germany has quite a few banks:

> As of December 2022, there were 1,389 credit institutions in [Germany]

-- https://www.statista.com/statistics/350502/eurozone-germany-...

edit:

US (FDIC insured only) 1 bank per 78,680 people, Germany 1 bank per 60,670 people (afaik every bank is essentially FDIC insured here), rough numbers from 2020-2023 wikipedia and statista.

Re: America will soon see a wave of bank mergers?

#44

Post by worldsayshi »

aqme28 wrote: post #35
passwordoops wrote: post #20

I've said it before, I'll say it again - "too big to fail" should be recast as "too big to exist" I'm not sure what the best solution is here, but making the big banks even bigger is not it. This is just going to make the banking system more concentrated and no concentrated market is good for anyone. Least of all because the past decade+ has set the precedent that the banks will be bailed out... If they're big enough

Yeah it seems obviously risky. A small bank gets a little insolvent and so it gets absorbed by a larger bank. This system works fine when there’s a larger bank to absorb them, but it’s obviously untenable. What happens when the largest bank needs saving?

It gets absorbed by the government?

Re: America will soon see a wave of bank mergers?

#45

Post by lvl102 »

People simply got used to not getting paid interest for their deposits. Bank business model needs to change or there will be new business models where deposits are fully guaranteed. That’s probably what the crypto people should have done but sadly they are too stupid (and greedy/scammy) to take on the traditional model.

Re: America will soon see a wave of bank mergers?

#46

Post by gorbachev »

newswasboring wrote: post #32
mtlmtlmtlmtl wrote: post #21

Earlier quoted context omitted.

Well America has plenty of outrage, but they're utterly divided and most that outrage just goes into poopooing the other side, instead of something productive like real demonstrations and protests with a real purpose. Instead we get outrage protests mainly designed for extremist groups to waste their time fighting eachother and playing at civil war.

America needs a leader who can inspire people to work with each other even when they don't agree on everything. I am quite sure you can build a significant coalition around financial issues, maybe even bigger than a super majority. But somehow people are not willing to work with each other unless they pass each other's purity tests. Thus, nothing changes and the status quo wins every time.

That will never happen in our lifetime.

Democrats can't do it, because Republicans will never cooperate with a Democratic Party president.

Republicans can't do it, because they will continue to nominate a culture warrior whose only job is to fight wokeness, so they aren't even interested in it.

This thing will keep escalating, relatively slowly, until it finally crosses the line and even the Republicans will figure out that maybe they ought to have some accountability.

My guess it will take minimum of two generations.

Re: America will soon see a wave of bank mergers?

#47

Post by ImHereToVote »

aqme28 wrote: post #35
passwordoops wrote: post #20

I've said it before, I'll say it again - "too big to fail" should be recast as "too big to exist" I'm not sure what the best solution is here, but making the big banks even bigger is not it. This is just going to make the banking system more concentrated and no concentrated market is good for anyone. Least of all because the past decade+ has set the precedent that the banks will be bailed out... If they're big enough

Yeah it seems obviously risky. A small bank gets a little insolvent and so it gets absorbed by a larger bank. This system works fine when there’s a larger bank to absorb them, but it’s obviously untenable. What happens when the largest bank needs saving?

Robin Williams had a fairly accurate depiction of what happens.

https://www.youtube.com/watch?v=etQeFJ2lbbo

Re: America will soon see a wave of bank mergers?

#48

Post by NikolaNovak »

cyclecount wrote: post #2

All of the rules put in place after 2008 are being ignored; the number of banks in the US pre-2008 financial crisis was about 31k. Now there are close to 3000. After this wave of mergers, there might be around 1000! And a few will be so large that they can make insane bets, betting on risky and novel new investment vehicles that will (maybe initially) pay off handsomely before ultimately failing dramatically. This wi…

As an outsider, can you help me put your post in context - is 31k banks posit as good or bad state of things?

(it seems an insane state of things to me, with incredible overhead and inefficiency but again, I'm an outsider. I've lived in USA for a while in late 90s and state of banking from consumer perspective in USA seemed a decade behind Canada and Europe, but that was a long long time ago)

Re: America will soon see a wave of bank mergers?

#49

Post by misja111 »

pbhjpbhj wrote: post #6
cyclecount wrote: post #2

All of the rules put in place after 2008 are being ignored; the number of banks in the US pre-2008 financial crisis was about 31k. Now there are close to 3000. After this wave of mergers, there might be around 1000! And a few will be so large that they can make insane bets, betting on risky and novel new investment vehicles that will (maybe initially) pay off handsomely before ultimately failing dramatically. This wi…

Financial speculation is zero sum, isn't it? So the fewer banks there are the more each one gets exposed to both sides? Your bank provides services for a person who monopolises some commodity, you have billions to loan out; but all your millions of other customers are hit by the price of that commodity and all deposit less, wiping out any increase in deposits. Doesn't that mean unless they are specialised banks, that…

Some financial speculation is zero sum, other is not. E.g. if a bank takes on a lot of clients with risky mortgages, both risk and possible gains are only on this bank. (Barring possible bail out, contagion risk etc)

Re: America will soon see a wave of bank mergers?

#50

Post by Waterluvian »

cyclecount wrote: post #2

All of the rules put in place after 2008 are being ignored; the number of banks in the US pre-2008 financial crisis was about 31k. Now there are close to 3000. After this wave of mergers, there might be around 1000! And a few will be so large that they can make insane bets, betting on risky and novel new investment vehicles that will (maybe initially) pay off handsomely before ultimately failing dramatically. This wi…

Canada has like 40 banks and strong regulation has kept them out of crises like in 2008.

What’s the right number of banks per capita?

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