The Future of the Big Banks
March 19, 2009
The day of the big bank may be over if the American public has their way. The banks grabbing headlines for losses, mismanagement, and greed, have almost exclusively been the nation's largest banks as ranked by deposits or assets. Local banks, credit unions, and internet banks have faced problems and losses arising from bad mortgage loans, but they have for the most part avoided the public's wrath. The distribution of taxpayer money (billions at a time) through the TARP program and other federal assistance programs has put the spotlight on the big banks. The latest scorecard for financial companies receiving U.S. taxpayer money includes:
AIG $170 billion
Bank of America $49 billion
JP Morgan Chase $45 billion
Citigroup $25 billion
Wells Fargo $25 billion
The companies listed above run brokerage firms, insurance companies, and investment banking, but at the core of each is a FDIC-insured bank. The question that many will be asking is: Do we want to keep our bank accounts at banks that have become public villians? On the one hand, it is more likely that the big banks will now have to offer better rates on their checking accounts, money market accounts, savings accounts, and CDs to attract or keep depositors. But on the other hand, these banks will also be under intense public and government scrutiny which may lead to more restrictive banking features and potentially less online bank deals. There is also discussion about breaking up the big-name financial companies which could even lead to the breakups of their banking divisions.
Whatever the future leads for the big banks finding the best bank rates and deals is always better with more banks in the United States and not less banks. The trend for the future is almost certainly that we will not allow a handful of banks to become too large or to become too integrated into the nation's financial bloodstream, that today's argument that certain banks are too large to fail cannot be repeated. This trend will be good for everybody with the possible exception of the million-dollar bonus babies at the big-name banks.
