I put this WSJ article in today’s The Day Ahead, however it deserves special attention as it reveals how a handful of banks are grabbing market share previously unheard of in American history, notwithstanding simplistic social studies textbooks about Progressive era robber barons and fanciful talk about greedy corporations precipitating the Great Depression. As it reads:
“Bank of America, J.P. Morgan and Wells Fargo now have 33% of all U.S. deposits, up from 21% in mid-2007-the fastest shift of such a large chunk of deposits in U.S. history. (emphasis added)…
The three huge banks made 57% of all home mortgages in the first quarter, up from 28% in 2008.”
The recession clobbered (and still is clobbering) small and community banks, many of which become consumed by the big boys. Let’s not forget that the Federal government gave tens of billions of dollars in stimulus to these large banks and they dutifully used their government largesse to outlast, runout, or buyout their competition. To be fair, big banks can offer services like ATM and online checking that better suit consumers than small banks. But this unprecedented rise, coupled with the new finreg which promises to impose debilitating compliance and transactions costs that fall disproportionately hard on smaller operations, risks creating a financial landscape where a few oligopolies run the whole show. That in turn practically begs for an unholy alliance between banks and the government, a relationship already emerging out of the new financial regulation. Or take health care reform and insurance companies as another example. It’s quite a cozy arrangement, big companies allow the government to regulate their competitors out of existence and in exchange give government the political support, not least of which financial, to prop up the Washington machine and the status quo. There is a lot of talk about how the White House is “anti-business.” Obama’s agenda is not to destroy enterprise in America, it’s to co-opt it into bed with government. That way Democrats can direct the resources of businesses in accordance with their socially just, eco-friendly worldview without going through the messy process of riding roughshod over the Constitution and nationalizing key industries. Heck, it worked for Wilson and FDR.