Mou é, Ch is ophe
Wo king Pape
Consolida ion and C isis in he US Banking Sec o
1980-2022
Wo king Pape s on Capi al as Powe , No. 2024/03
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Sugges ed Ci a ion: Mou é, Ch is ophe (2024) : Consolida ion and C isis in he US Banking Sec o
1980-2022, Wo king Pape s on Capi al as Powe , No. 2024/03, Capi al as Powe - Towa d a New
Cosmology o Capi alism, s.l.,
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Consolida ion and C isis in he US Banking Sec o
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Mou é
1
Consolida ion and C isis in he US Banking Sec o 1980-2022
Ch is ophe Mou é
Sec ion 1: In oduc ion
Much o he economic analysis o banking c ises ocuses on he in e play be ween
concen a ion and s abili y. A common heo y is ha concen a ion is associa ed wi h g ea e
s abili y, whe eas compe i ion is associa ed wi h ins abili y.
1
In his iew, he e is a ade-o
be ween, on he one hand, he highe p ices and highe p o i s associa ed wi h a banking ca el,
and on he o he , equen banking c ises and lowe p ices caused by a agmen ed sec o . Howe e ,
his heo y is no en i ely con incing. P incipally, i ends o ea compe i ion and concen a ion
as independen a iables, whe eas in eali y, causali y wo ks bo h ways: banks ac i ely wo k o
ans o m he s uc u e o he sys em and anscend appa en cons ain s – whe he h ough
coo dina ing in e es a es, in luencing policy, o by ans o ming he business landscape h ough
co po a e amalgama ion. In addi ion, he las wo majo banking c ises in he US occu ed in
d ama ically di e en condi ions o concen a ion om one o he , complica ing any ob ious
empi ical connec ion be ween concen a ion and s abili y.
2
In his pape , I y o mo e beyond his hypo hesis by in es iga ing he ela ionship be ween
co po a e concen a ion and banking s abili y h ough he lens o o ganized powe . Using a
combina ion o quan i a i e and quali a i e analyses, I make wo claims. Fi s , since he 1980s, he
1
See o ins ance Vi es, “Compe i ion and S abili y in Banking”; Beck e al., Bailing ou he Banks; McCo mack,
“Canadian Banking S abili y h ough he Global Financial C isis o 2007–8”; Ba ell and Ka im, “Banking
Concen a ion And Financial C ises.”
2
As a case in poin , o bo h policy-make s and economis s, he meaning and measu emen o compe i ion and
concen a ion in he banking sec o shi ed in he 1980s o accommoda e a mo e posi i e iew o me ge s (Dymski,
1999, 42). In o he wo ds, he de ini ion o an ‘accep able’ le el o concen a ion is o en a ma e o poli ics mo e
han any hing else.
Mou é
2
di e en ial p o i abili y o la ge banks has been d i en by co po a e amalgama ion.
3
Second, c ises
end o be ollowed by an inc ease in he pace o amalgama ion. As a esul , since he 1980s,
banking c ises ha e p eceded a d ama ic edis ibu ion o esou ces and con ol o a hand ul o
la ge banks. While i is no clea ha concen a ion makes a banking c isis less likely, he e idence
sugges s ha c isis makes concen a ion mo e likely. Though he esea ch p esen ed he e is only
en a i e and explo a o y, i indica es ha since he 1980s, la ge banks ha e emade he business
and egula o y landscape in ways ha de y he logic o a simple bina y ela ionship be ween
concen a ion and s abili y, and ha his needs o be aken in o accoun when analysing he
dynamics o banking c ises.
The pape is s uc u ed as ollows. Sec ion 2 ou lines and c i iques a common heo y o he
ela ionship be ween concen a ion and c isis ha I label, a e Geo ey McCo mack, he
“Concen a ion-S abili y Hypo hesis” (CSH).
4
Sec ion 3 ou lines an al e na i e heo e ical
amewo k: capi al as powe (CasP). This app oach places o ganized powe a he hea o i s
analysis and p o ides he heo e ical jus i ica ion o my empi ical ocus on co po a e
amalgama ion and di e en ial ea nings. Sec ion 4 p esen s quan i a i e e idence o he igh
connec ion be ween hese wo dynamics in he case o he 25 la ges US banks. I shows ha since
he 1980s, changes in di e en ial p o i abili y o he la ges US banks a e closely co ela ed wi h
changes in co po a e amalgama ion. Sec ion 5 gi es a b ie o e iew o wo majo banking c ises
and how policy make s emo ed ba ie s o me ge ac i i y and o he wise encou aged co po a e
amalgama ion. Sec ion 6 concludes by o e ing some hough s on he implica ions o he indings
in he con ex o a b oade esea ch agenda.
3
By ‘di e en ial p o i abili y’, I mean p o i abili y measu ed agains an a e age benchma k o he p o i abili y o
he 500 la ges US i ms (e.g., he S&P 500). Mo e on his in sec ion 3.
4
McCo mack, “Canadian Banking S abili y h ough he Global Financial C isis o 2007–8.”
Mou é
3
Sec ion 2: he concen a ion-s abili y ques ion
The CSH a gues ha he e is an inhe en ade-o be ween banking s abili y and
concen a ion. When he sec o is agmen ed, banks ace g ea e compe i ion and a e he e o e
mo e likely o ake g ea e isks han hey would o he wise.
5
By con as , when he banking sec o
is concen a ed, high p o i s make excessi e isk- aking unappealing.
6
Fo ins ance, in a
compa ison o US and Canadian banking s uc u e, B ean e al a gue ha he Canadian banking
sys em, which allows a small numbe o la ge banks o ope a e as a ca el, con ibu es o s abili y
because he abili y o cha ge highe in e es a es (gene a ing highe p o i s o he banks)
discou ages he banks om engaging in iskie p o i s a egies.
7
Fo policy-make s, his
hypo hesis implies aking a balanced app oach o wha is essen ially a lose-lose si ua ion: ei he
deal wi h he highe p ices associa ed wi h a powe ul banking ca el, o endu e he pe iodic c ises
associa ed wi h he ‘ ee ma ke ’.
8
The e a e heo e ical and empi ical easons o doub he use ulness o his app oach. Fi s ,
i ends o assume ha causali y mo es in only one di ec ion – i.e., om he ‘ma ke s uc u e’
(ei he concen a ed o compe i i e) o he beha iou o indi idual banks. Ma ke s uc u e is aken
o be he independen a iable de e mining bank beha iou , while he ma ke s uc u e i sel is se
by ex e nally gi en ac o s: in e es a es, he egula o y en i onmen , he size and quan i y o
banking ins i u ions, e c. In eali y, howe e , causali y goes bo h ways – indi idual banks ac i ely
wo k o shape and eshape bo h he policy en i onmen and he o ganiza ional s uc u e o he
5
Beck e al., Bailing ou he Banks, 18.
6
Beck e al, 18.
7
B ean, K yzanowski, and Robe s, “Canada and he Uni ed S a es,” 266.
8
To be su e, mos p oponen s o his heo y o e ex ensi e addi ional ac o s ha explain why concen a ion may
no necessa ily en ail g ea e s abili y. Ye i is wo h asking a wha poin he ecou se o ex enua ing ci cums ances
dic a es a econside a ion o he unde lying hypo hesis. B ean, K yzanowski, and Robe s, “Canada and he Uni ed
S a es,” 266.
Mou é
4
sec o . While some, like Beck e al, aise he possibili y o a e e sal o causal ela ions, he
e e sal is one whe e he ‘e iciency’ o di e en i ms shapes he ma ke s uc u e. In e ec ,
whe e esea che s e e se causali y, hey s ill do no conside ha i ms ac i ely seek o emake
he business landscape and s uc u al e ec s a e judged inciden al o o he beha iou al dynamics.
9
As such, he heo y does no accoun o he ac ha banks, and in pa icula la ge, poli ically
connec ed banks, a e highly mo i a ed o y o ac in ways ha end up ans o ming he ‘ma ke
s uc u e’— h ough me ge s and acquisi ions, by c ea ing no el inancial ins umen s ha elude
egula ion and obscu e inancial isk, o e en h ough ou igh collusion.
10
As I discuss below,
since he 1980s, such ac ics ha e indeed d i en majo changes in he sec o . A bes hen, his
means ha any analysis o he banking sec o mus conside ha he business landscape is always
ac i ely in he p ocess o e-o de ing ‘ om he inside’, h ough ac ions han ein o ce and/o
unde mine he ixi y o any gi en mac o-s uc u al a iable. A wo s , i calls in o ques ion he
basic logic o he CSH.
A close look a he las wo majo banking c ises since 1980 u he complica es he
pic u e. One CSH in e p e a ion o his pe iod is ha o Beck e al, who a gue ha de egula ion in
he US banking sec o in he 1980s ep esen ed a ansi ion om a ma ke s uc u e o high
concen a ion/low compe i ion o one o inc eased compe i ion and ins abili y. “The G ea
Dep ession,” hey claim, “led o he discon inua ion o mos s anda d compe i ion policies in
banking in o de o os e inancial s abili y” and by con as he pe iod a e 1970 was
cha ac e ized by “a swing o he pendulum owa ds de egula ion, wi h mo e compe i ion and
inno a ion bu also wi h many banking c ises.”
11
This na a i e is ques ionable o a numbe o
9
Beck e al, 20.
10
E.g., he libo scandal. Vaughan and Finch, “Libo Scandal.”
11
Beck e al, 1.
Mou é
5
easons. Fi s , banking de egula ion s a ing in he la e 1970s was explici ly passed as a esponse
o supposed inancial ins abili y. As Dymski no es, a combina ion o high nominal in e es a es
and limi s on maximum a es o e u n o bank deposi s led o an ou low o sa ings in o less-
egula ed inancial ins umen s (ins umen s in which deposi o y banks we e legally ba ed om
in es ing).
12
I was in he con ex o “a combina ion o mac oeconomic ad e si y and egula o y
s ic u es” ha “poli ical leade s and indus y egula o s s epped in o sa e he eeling banking
sys em.”
13
The ques ion is, i compe i ion causes ins abili y, as he CSH a gues, hen why would
policy-make s a emp o inc ease compe i ion h ough de egula ion in esponse o ins abili y?
Second, Beck e al conside s he banking sec o in he 1970s o ha e a s uc u e o low
compe i ion, because o he s ic unc ional and geog aphic es ic ions on banks.
14
Ye o he s
a gue ha he banking c isis began in he 1970s in la ge pa because deposi o y banks aced oo
much compe i ion om non-bank inancial ins i u ions ha we e no as hea ily egula ed and could
p omise highe e u ns on in es men .
15
Fo ins ance, Geo g Hanc no es ha “compe i ion
inc eased om se e al di ec ions: wi hin he U.S. banking indus y i sel and om h i
ins i u ions, o eign banks, and he comme cial pape and junk bond ma ke s.”
16
Fo hei pa ,
Be ge e al acknowledge his and e e o i as “ex e nal compe i ion” – compe i ion coming om
ou side he banking sec o p ope .
17
Howe e , whe he i was in e nal o ex e nal, he ques ion
emains, why would policy make s de egula e— emo ing ba ie s a ound bank lending and
co po a e amalgama ion—as a esponse o compe i ion, i de egula ion was unde s ood o inc ease
compe i ion and hus make ins abili y wo se?
12
Dymski, The Bank Me ge Wa e, 36.
13
Dymski, 39.
14
Beck e al., Bailing ou he Banks, 1.
15
Dymski, The Bank Me ge Wa e, 37; Glasbe g, Da i a Sil en and Dan L. Skidmo e, “The Role o he S a e in he
C iminogenesis o Co po a e C ime: A Case S udy o he Sa ings and Loan C isis,” 114.
16
Hanc, “The Banking C ises o he 1980s and Ea ly 1990s: Summa y and Implica ions,” 2.
17
Be ge e al., “The T ans o ma ion o he U.S. Banking Indus y,” 57.
Mou é
6
Thi d, he CSH ails o accoun o why he indus y has unde gone a apid and d ama ic
inc ease in concen a ion no why ins abili y would e u n a e such a consolida ion had aken
place. The de egula ion o me ge es ic ions a he end o he 1970s se o and sus ained a wa e
o co po a e amalgama ion. In e ec , measu es supposedly a emp ing o inc ease compe i ion
immedia ely esul ed in ising le els o concen a ion.
18
This wa e o consolida ion spanned nea ly
h ee decades and saw he numbe o banking ins i u ions in he US educed by o e 50% (see
igu e 1). In 1987, he e we e nea ly 18,000 banking ins i u ions, while he op o y- i e banks
owned 32% o all banking asse s. By 2007, he e we e only 8,500 banking ins i u ions and he op
six banks owned 40% o all banking asse s. Con a y o he c isis in he 1980s, he sub-p ime
mo gage c isis in 2008 a i ed a a momen when he banking sec o was a guably mo e
concen a ed han e e be o e. Was he 2008 c isis hen a case o oo much compe i ion o oo
li le?
18
Be ge e al acknowledge ha he e mus ha e good easons o consolida ion o ake place, bu i is s ange ha
hey do no explo e he e ec s o consolida ion on s abili y, gi en ha i is by a he mos impo an ac o in
changes in concen a ion in ha pe iod. Be ge e al., “The T ans o ma ion o he U.S. Banking Indus y,” 66-68.
Mou é
7
Figu e 1: Concen a ion in he US Banking Sec o , 1980-2023 (Sou ce: FDIC)
In sum, he beha iou o bo h banks and egula o s since he 1980s does no i he logic o
he CSH and as such i does no appea o p o ide a sa is ac o y accoun o he his o ical
ela ionship be ween concen a ion and s abili y in he US banking sec o . As I show below,
ins ead o ea ing compe i ion and concen a ion as concep ually opposed, s uc u ally de e mined
ac o s shaping bank beha iou , a mo e p oduc i e app oach has o conside ins ead how banks
ac i ely shape he s uc u e o he banking landscape o hei di e en ial ad an age.
Sec ion 3: he capi al as powe iew: concen a ion as ‘b ead h’
Mo ing away om he CSH, his pape in es iga es he ela ion be ween concen a ion,
p o i abili y, and c isis hough an engagemen wi h he capi al as powe (CasP) poli ical economic
Mou é
14
in 2003 (implying he banks we e ailing, a he han bea ing he a e age), i e yea s be o e he
2008 c isis. In e es ingly, i was a ound his ime ha he la ge banks s a ed o become hea ily
in es ed in he ill- a ed mo gage-backed secu i y ma ke , among o he opaque, high- isk
de i a i es.
39
The iming sugges s ha he decision o engage in iskie in es men s a egies may
be ela ed o he dec easing pace o amalgama ion – o a leas a dec ease in he u u e p ospec s
o di e en ial accumula ion h ough amalgama ion. A e he 2008 c ash, he pace o
amalgama ion also jumped back up, and he di e en ial p o i abili y o he big banks quickly
ollowed, nea ly e u ning o he p e ious a e o g ow h. Howe e , his oo was sho -li ed: he
pace o amalgama ion quickly la lined and began o decline, and he pace o di e en ial
p o i abili y began o decline again.
Figu e 3: Changes in di e en ial p o i abili y and changes in he o al numbe o banking ins i u ions (Sou ces:
Compus a Capi al IQ o p o i abili y, FDIC o o al banking ins i u ions)
39
Fo ins ance, Simko ic no es ha “by 2007, he op six subp ime mo gage o igina o s included di isions o Ci i,
HSBC, Coun ywide, Wells Fa go, Me ill Lynch, and Chase.” Simko ic, “Compe i ion and C isis in Mo gage
Secu i iza ion,” 224, 237.
Mou é
15
Sec ion 5: C isis as an engine o o e coming ba ie s o consolida ion
In his sec ion, I will b ie ly ou line he se ies o egula o y changes and go e nmen
ac ions ollowing bo h c ises o show how in bo h cases, he c isis p o ided jus i ica ion o he
emo al o excep ional exemp ion o ba ie s o u he consolida ion, which had he p incipal
e ec o edis ibu ing con ol o e banking asse s upwa d o he big banks.
40
In he case o he
S&L c isis, policymake s emo ed long s anding ba ie s o in e s a e banking s a ing in he la e
1970s. In he case o he mo gage c isis, policymake s again ook an ac i e ole in nego ia ing
me ge s, including wi h banks ha we e hemsel es in need o bailing ou . In addi ion, pos -c isis
egula ions like he Dodd-F ank Ac we e widely seen o ha e li le e ec in cu bing u he
consolida ion, and in some ways may ha e made consolida ion mo e likely.
41
5.1 The S&L c isis
Be ween 1966 and 1981, he abili y o banks o consolida e h ough me ge s and
acquisi ions was la gely limi ed by egula ion.
42
In one eading, he change in egula o y
pe spec i e eme ged du ing his pe iod as a esponse o a long pe iod o s uggle be ween banks
and he Fede al Rese e, in which banks sough ways o ci cum en es ic ions on in e es and
deposi a es by c ea ing new in es men ins umen s ou side o egula o y con ol.
43
The s uggle
40
This sec ion is no in ended o explica e he ull complexi y o e en s su ounding hese c ises, bu a he o y o
ges u e a how one migh in e p e he quan i a i e e idence h ough he lens o he his o ical-con ex ual eco d.
41
B ean, K yzanowski, and Robe s, “Canada and he Uni ed S a es,” 265; Aiello and Ta be , “Bank M&A in he
Wake o Dodd-F ank,” 910.
42
Al hough i is ou side he scope o his pape , he s o y o banking egula ion p io o he 1980s is mo e complex
han one o unin e up ed es ic i eness. Nume ous s uggles and adjus men s be ween banks and egula o s om
he passage o he 1927 McFadden Ac , which hea ily es ic ed banking powe , o de egula ion in he 1980s, imply
ha ‘de egula ion’ is a pe ennial goal o he banking sec o , and ha hey had some successes p io o he 1980s.
Dymski, The Bank Me ge Wa e, 34-36.
43
Dymski, 36.
Mou é
16
be ween banks and egula o s came o a head in he 1970s, when high in e es a es pushed mo e
deposi o s in o a ious nonbank ins i u ions o e ing mo e a ac i e a es o e u n on hei
sa ings.
44
Because S&Ls we e speci ically designed and egula ed o p o ide a o dable loans and
mo gages o he middle class, hey we e pa icula ly ulne able o ising in e es a es.
45
Business
ade g oups a gued ha he c isis was due o egula ion – ha es ic ions we e hampe ing he
abili y o banks o compe e.
46
Fede al egula o s ag eed, deciding ha de egula ion could p o ide
“banks and h i s mo e eedom o compe e wi h nonbank inancial i ms.”
47
New policies no
only emo ed in e es a e limi s, bu also disman led “ es ic ions on he in e mingling o
comme cial banking, home banking, eal es a e, and secu i ies in es ing.”
48
While a i s
de egula ion appea ed o ease he c isis, much o hese p o i s we e he esul o a elaxing o
egula ions a ound he abili y o banks o in es in iskie asse s, which caused causing a boom in
banking p o i s. By he la e 1980s, many o hese in es men s had ailed o gene a e he expec ed
e u ns and bank ailu es spiked, leading o a signi ican go e nmen bailou and u he
accele a ion o he pace o consolida ion.
49
In esponse o his ex ended pe iod o c isis (beginning in he 1970s and con inuing h ough
he 1980s) policy-make s emo ed successi e ba ie s o amalgama ion, while s a e and ede al
au ho i ies o en encou aged me ge s as a pe cei ed solu ion o inancial ins abili y – some imes
44
Dymski, The Bank Me ge Wa e, 36.
45
Glasbe g, Da i a Sil en and Dan L. Skidmo e, “The Role o he S a e in he C iminogenesis o Co po a e C ime:
A Case S udy o he Sa ings and Loan C isis,” 115.
46
Glasbe g, Da i a Sil en and Dan L. Skidmo e, “The Role o he S a e in he C iminogenesis o Co po a e C ime:
A Case S udy o he Sa ings and Loan C isis,” 115.
47
Dymski, 39.
48
Glasbe g, Da i a Sil en and Dan L. Skidmo e, “The Role o he S a e in he C iminogenesis o Co po a e C ime:
A Case S udy o he Sa ings and Loan C isis,” 115.
49
Also con ibu ing o he c isis was he ac ha de egula ion in he ea ly 1980s c ea ed op imal condi ions no only
o o e -le e aged isk aking, bu o banking aud. Fo an in-dep h discussion o banking aud, as well as he ole
o junk bonds (a key in es men ehicle implica ed in he c isis) in p ecipi a ing he S&L c isis, see Glasbe g,
Da i a Sil en and Dan L. Skidmo e.
Mou é
17
e en b eaching exis ing in e s a e ba ie s o ce ain “mo ibund banks and h i s.”
50
The change
was apid: be o e 1982, “excep o g and a he ing a angemen s, no a single s a e pe mi ed
MBHCs [mul iple bank holding companies] om o he s a es o own banks wi hin i s bo de s,”
whe eas by 1990, “all bu six small s a es accoun ing o less han 4 pe cen o g oss domes ic
banking asse s allowed some in e s a e ac i i y.”
51
By 1994, he Riegle-Neal In e s a e Banking
and B anching E iciency Ac essen ially emo ed he las emaining egula ions limi ing in e s a e
bank me ge s.
52
Despi e he pu a i e goal o escuing smalle S&Ls and h i s, he as majo i y
o me ge and acquisi ion ac i i y in his pe iod was unde aken by he la ges banks, while he
banks which pu sued amalgama ion he mos agg essi ely o en became he bigges . As Rhoades
no es, “ he la ges wen y- i e banking o ganiza ions accoun ed o 11% o all me ge s and
acqui ed abou 45% o all banking asse s be ween 1980 and 1994,” despi e making up only a iny
ac ion o he se e al housand exis ing banking ins i u ions.
53
Whe he o no i was ini ially
igge ed by p essu es gene a ed ou side he deposi o y banking sec o , he c isis none heless
p o ided he jus i ica ion o a d ama ic pe iod o de egula ion ha allowed la ge banks o
massi ely inc ease hei di e en ial size h ough amalgama ion. E en when he c isis me as asized
in he la e 1980s, he policy playbook o encou aging consolida ion emained he same.
5.2 The sub-p ime mo gage c isis
While he e we e se e al ac o s leading up o he 2008 c isis, he o e all na a i e is ha
de egula ion in he banking indus y led o massi ely o e -le e aged in es men s in inancial
50
Kane, “De Ju e In e s a e Banking,” 3.
51
Be ge e al., “The T ans o ma ion o he U.S. Banking Indus y,” 70.
52
Be ge e al, 62.
53
Rhoades, S ephen A., “Bank Me ge s and Indus ywide S uc u e, 1980–94,” 21-22.
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18
de i a i es ha bundled mo gage deb in o adeable secu i ies.
54
When he ajec o y o housing
p ices slowed and e e sed some ime in 2006, he alue o a la ge numbe o hese secu i ies
became suspec . The c isis p ope was igge ed by e ela ions ha he la ge insu ance company
Ame ican In es men G oup (AIG), as well as se e al big in es men banks, we e insol en as a
esul o hei posi ions in he mo gage-backed secu i ies ma ke .
55
The ensu ing c isis led o wide-
anging go e nmen bailou s o he banking sec o , as well as he collapse and i e sale o se e al
la ge inancial ins i u ions. By No embe o 2008, he ede al go e nmen had commi ed $3.5
illion o s abilizing he (US and global) inancial sys em.
56
Al hough he e we e a guably ew egula o y ba ie s o consolida ion le when he
mo gage c isis occu ed in 2007-2008, his c isis oo jus i ied a wa e o go e nmen nego ia ed
mega-me ge s be ween some o he la ge banking ins i u ions. In addi ion, i p ecipi a ed a wide
eaccele a ion o me ge and acquisi ion ac i i y which con inued despi e new egula ion
supposedly designed o inc ease he s abili y o he banking sys em. Thus, c isis again p o ided an
oppo uni y o u he consolida ion, esul ing in he u he upwa d edis ibu ion o con ol
wi hin he banking sec o .
A e a d op in he pace o amalgama ion p io o 2008, banking concen a ion ac ually
inc eased signi ican ly in he yea s ollowing he c isis.
57
Though many smalle banks we e also
aken o e du ing his pe iod, he e we e also se e al megadeals: Bea S e ns was acqui ed by
JPMo gan, Me ill Lynch by Bank o Ame ica, and Wacho ia, a he ime he ou h la ges bank
in he US, was acqui ed by Wells Fa go.
58
Regula o s played a cen al ole in his p ocess. Looking
54
“The U.S. Financial C isis.”
55
“The U.S. Financial C isis.”
56
Simko ic, “Sec e Liens and he Financial C isis o 2008,” 253.
57
Rao‐Nicholson and Salabe , “Impac o he Financial C isis on C oss‐Bo de Me ge s and Acquisi ions and
Concen a ion in he Global Banking Indus y,” 162.
58
Cho a as, Banks, Banke s, and Bank up cies unde C isis, 53-54.
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19
o ‘ he ma ke ’ o sa e i ms acing bank up cy, hey encou aged and ac i ely nego ia ed such
me ge s, e en as some o he acqui ing banks we e hemsel es being bailed ou by he
go e nmen .
59
“The i ony o his si ua ion,” Cho a as no es, is ha “s a egically mo i a ed banks
capi alized on go e nmen policies ha encou aged he inancial indus y o p oceed wi h
consolida ion.”
60
E en in he a e ma h o he c isis, Aiello and Ta be a gue ha he Dodd-F ank Ac ,
ou ed as a ans o ma ional e o m, may be “al oge he insigni ican ” in he con ex o p e en ing
u he amalgama ion.
61
They a gue ha a combina ion o ac o s: inc eased compliance cos s om
he new egula ions; es ic ions on le e age and secu i ies in es men ; and c ucially, “ ipening
condi ions o indus y consolida ion,” mean ha egula o s would con inue o allow me ge s
based on wo ies abou ins abili y.
62
In addi ion, exp ess limi s on concen a ion in Dodd-F ank
a e bo h exceedingly high and can be wai ed by egula o s a will, meaning ha , depending on he
go e nmen in o ice, i ms can expec coope a ion on me ge deals.
63
As shown in igu e 3 abo e,
his p edic ion appea s o ha e been bo ne ou , as he pace o amalgama ion emained ele a ed
un il 2020.
Sec ion 6: Conclusion
To e u n o he specula i e hypo hesis aised a he end o sec ion 3: wha can we now say
abou he deepe ela ionship be ween consolida ion and c isis? The connec ion be ween
di e en ial p o i abili y and co po a e amalgama ion sugges s ha he push o de egula ion in he
59
Cho a as, 56.
60
Cho a as, 56.
61
Aiello and Ta be , “Bank M&A in he Wake OF Dodd-F ank,” 910.
62
Aiello and Ta be , 910.
63
A ms ong and Noonan, Lau a, “P essu e Rises o US Bank Me ge s a e Bigges Tie-up since Financial C isis;
Banks,” 2.
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20
1980s esul ed in he la ges banks d ama ically augmen ing hei di e en ial p o i abili y h ough
amalgama ion. By he ea ly 2000’s howe e , banks may ha e become ‘ ic ims o hei own
success’ and aced a dwindling pool o i ms o acqui e. The eme ging h ea o di e en ial
decumula ion may ha e been a ac o in he decision o agg essi ely pu sue he isky in es men
s a egies ha led o he 2008 c isis. A leas , he iming o he slowing o he pace o amalgama ion
by la ge banks and hei subsequen la ge be on sub-p ime mo gage-backed secu i ies is
sugges i e in his con ex .
64
This hypo hesis emains o be in es iga ed u he . Howe e , a a minimum, he e idence
indica es ha he ela ionship be ween concen a ion and c isis in he banking sec o should be
e isi ed wi h new concep ual and empi ical ools. The concen a ion-s abili y hypo hesis does no
con incingly explain he ela ionship be ween concen a ion and he las wo majo banking c ises
on ei he heo e ical o empi ical g ounds. By con as , e en a his basic explo a o y le el, he
capi al as powe app oach o e s no el insigh s. F om his pe spec i e, he dynamics o co po a e
amalgama ion appea closely ela ed o he di e en ial accumula ion o dominan banks, aising
he possibili y ha banking c ises may also be ela ed, i no o amalgama ion di ec ly, hen o he
dynamics o di e en ial accumula ion mo e b oadly. As US banks con inue o g ow la ge (and
he pool o acquisi ion a ge s con inues o sh ink) gaining a deepe unde s anding o hese
dynamics emains impo an .
Fu he in es iga ion migh also explo e how his esea ch migh use ully engage wi h
o he discussions a ound mone a y powe . The inc easingly in eg a ed aims o egula o s and la ge
banks since he 1980s aises ques ions abou how o concep ualize mone a y powe mo e
64
In e es ingly, he e is some e idence he s ock ma ke c ash o 1987 was in pa igge ed by he possibili y o new
egula ions ha would hampe he abili y o i ms o engage in me ge and acquisi ion ac i i y. Mi chell and Ne e ,
“T igge ing he 1987 S ock Ma ke C ash: An i akeo e P o isions in he P oposed House Ways and Means Tax
Bill?” 64.
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21
gene ally. The concep usually e e s o he in e na ional in luence o a go e nmen h ough i s
abili y o issue cu ency and legisla e mone a y policy, and h ough o he ac o s ou side he
go e nmen ’s di ec con ol (like he in e na ional use o i s cu ency). Ha die and Thompson, o
ins ance, ollowing Benjamin Cohen, link powe in his sense o he mone a y au onomy o he US
go e nmen is-à- is o he pa ies.
65
Simila ly, Hyoung-kyu Chey a gues ha mone a y powe is
in e wined wi h and can ein o ce o he o ms o “ha d powe .”
66
Wha he abo e analysis
indica es is ha he mone a y powe o he US go e nmen is also in e wined wi h he powe o
la ge banks in a complex way, po en ially blu ing he concep ual lines be ween poli ical and
economic dynamics; be ween public and p i a e o ms o powe ; and be ween na ional
go e nmen s and he ‘s a e o capi al’.
67
In sho , u he s udy o he ela ionship be ween p i a e
banking powe and go e nmen al mone a y powe could ha e wide implica ions o in e na ional
poli ical economic schola ship.
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