Big Banks: What Are They Good For?
April 30, 2010
The obvious answer to the above headline, if you're a savings investor, is: big banks are good for giving savings investors extremely low interest rates on savings accounts, CDs, and money market accounts.
But there's a larger, less flippant question here about the large banks, those being Wells Fargo, Bank of America, Chase, and Citigroup. This bigger question is whether banks have some business need to be as big as they are, or whether our financial system would benefit from more competition.
Surely it's hard to argue that four banks holding 40 percent of total deposits is good for bank rates. Would you pay high interest rates on savings accounts, CDs, and money market accounts if your customers were coming to you in droves while you're paying them low interest rates?
Nevertheless, Bank of America CEO Bryan Moynihan and JP Morgan Chase CEO Jamie Dimon have both been making the public case that big banks are good for business and America. Their logic:
-- Big banks can make big loans
-- Big banks keep America competitive globally, helping businesses expand into foreign markets (Citigroup has been really playing up this angle)
-- Big banks can "innovate" new financial products (Bank of America's mortgage department, formerly known as Countrywide, has begun to wade back into doing non-standard mortgages)
What do you think? Granted they're no good for high deposit rates, but overall, do the big banks have a reason to exist?
No Stocks 4me Kramer
30 April 2010 at 12:14 pm
Hy SunTrust and BB&T aren't much different on their rates. Nor is my l;ocal Credit Union. They ALL are in the same game.
I have Wells, BBT, Suntrust and this CU here So its their rates I have to deal with. All I can do at this point is wait them and Uncle Ben out.
The only so called small bank I see round here has even worse rates.