We have too many massive banks.
As I follow David Goldman I find something wrong with the banking industry. The fundamental problem is that they are held captive by the Administration policy of free money and 13% deficit. They therefore can make money on the spread between the prime rate and the treasury curve which is not very steep now, but probably will steepen if we inflate. But the effect is that business credit and loaning is dried up. Basically all of the big banks are making money like communist apparatchiks. Are there any that remain to serve capital?
Well it's hard to imagine there wouldn't be. The problem is that there aren't many left. When you look at bank acquisitions and mergers over the past 20 years, there seem to be few very large banks left and a half dozen massive banks are the American banking industry.
Recently, we know a bunch of mergers were forced. But long before that all through the 90s banks were piling on top of banks. I remember when NCNB, later NationsBank went on a tear through the South. Barnett Bank and hundreds of others got eaten. For the short time I lived in Atlanta, the banking scene was dramatically changed as FirstUnion grew.
Who's gone? Shawmut, Barnett, BayBank, Crocker, Security Pacific, First Chicago, First Boston, Valley National, First Interstate, FirstUnion, Great Western, FleetBoston, MBNA, Riggs, World Savings.
It's just astounding. All of these banks that might have failed, got swallowed up and made banks that were too big to fail because nothing has been spun off. The market for banking has shrunk and we are deep into oligopoly territory. It's bad, very bad.
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