Fewer Banks, Less Competition

In the last twenty years 4,823 U.S. banks disappeared, some through mergers, some failed. We have gone from 10,220 to 5,397, a drop of 47%. Now, just nine banks hold 40% of domestic deposits. They also hold a heck of a lot of derivatives (remember these from the Great Recession?) and do a lot of trading among themselves. In 2016 the U.S. Treasury’s Office of Financial Research (OFR) found that the Federal Reserve’s stress tests were failing to capture the predominant risk on Wall Street.The FDIC’s Deposit Insurance Fund has only $100.2 billion as of September 30, 2018. Yet, just the none biggies hold over five trillion in insured deposits. Are you starting to worry yet?