Wednesday, May 30, 2012

The Market and Political Power of Banks

An excellent article by Luigi Zingalez (University of Chicago Booth School of Business) for Bloomberg on the political power of US banks.


“One beneficial side effect of the Glass-Steagall Act was to fragment the banking sector and reduce the financial industry’s political power. Another was to foster healthy competition between commercial banks and investment banks.

Starting in the 1970s, these limits were progressively removed. The deregulation unquestionably increased the efficiency of the banking sector and fostered economic growth. But with this growth came concentration. In 1980, there were 14,434 banks in the U.S., about the same number as in 1934. By 1990, this number had dropped to 12,347; and by 2000, to 8,315. In 2009, the number was less than 7,100.”

The article is well worth reading in full  here.

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