Era 1: The Age of Community Banking (Pre-1980)
A Nation of Local Banks
After the Great Depression, the Glass-Steagall Act of 1933 created a system of small, stable, local banks. Interstate banking was prohibited, keeping banks small and focused on their communities.
- Banks couldn't cross state lines
- Commercial and investment banking were separate
- The top 4 banks controlled just 15% of deposits
- Thousands of community banks served local areas
During this era, your bank was likely headquartered in your community. Bankers knew their customers personally. Decisions about loans were made locally by people who understood local businesses and economies.
Era 2: The S&L Crisis and First Wave of Consolidation (1980s)
Savings & Loan Crisis
The Savings and Loan Crisis marked the beginning of modern bank consolidation. Over 1,000 S&Ls failed, and many were absorbed by larger institutions. The crisis cost taxpayers $124 billion.
- Over 1,000 S&Ls failed
- Taxpayer cost: $124 billion
- Many community institutions absorbed by larger banks
- Beginning of interstate banking allowances
The 1980s saw the first major deregulation of banking. The Depository Institutions Deregulation and Monetary Control Act of 1980 began removing interest rate caps, and subsequent laws started allowing interstate banking.
Era 3: The Merger Mania (1990s)
Consolidation Accelerates
The 1990s saw an unprecedented wave of bank mergers. The Riegle-Neal Act of 1994 allowed interstate banking nationwide. The decade ended with the repeal of Glass-Steagall, removing the last major barriers to consolidation.
Major Mergers of the 1990s
| Year | Merger | Result |
|---|---|---|
| 1991 | NCNB + C&S/Sovran | NationsBank (later Bank of America) |
| 1995 | First Union + First Fidelity | First Union (later Wachovia, then Wells Fargo) |
| 1996 | Chemical + Chase Manhattan | Chase Manhattan (later JPMorgan Chase) |
| 1998 | NationsBank + BankAmerica | Bank of America |
| 1998 | Citicorp + Travelers | Citigroup |
The End of Glass-Steagall (1999)
The Gramm-Leach-Bliley Act of 1999 repealed the Glass-Steagall Act, allowing commercial banks to merge with investment banks and insurance companies. This removed the final barrier to creating massive financial conglomerates.
Era 4: The 2008 Crisis and "Too Big to Fail" (2000s)
Crisis-Driven Consolidation
The 2008 financial crisis accelerated consolidation dramatically. Large banks absorbed failing competitors, emerging from the crisis even larger than before.
Crisis Acquisitions
| Acquirer | Acquired | Year |
|---|---|---|
| JPMorgan Chase | Bear Stearns | 2008 |
| JPMorgan Chase | Washington Mutual | 2008 |
| Bank of America | Countrywide | 2008 |
| Bank of America | Merrill Lynch | 2008 |
| Wells Fargo | Wachovia | 2008 |
The 2008 crisis was caused in part by banks being "too big to fail." Yet the solution involved making the surviving banks even bigger through acquisitions—worsening the very problem that caused the crisis.
Era 5: The Megabank Era (2010-Present)
Today's Banking Landscape
The top 4 banks now control 44% of all US deposits—triple their 1984 share. Banking is more concentrated than at any point in American history.
- JPMorgan Chase: $4.0 trillion in assets
- Bank of America: $3.3 trillion in assets
- Wells Fargo: $1.9 trillion in assets
- Citigroup: $2.4 trillion in assets
What Happened to Community Banks?
Community banks haven't entirely disappeared—about 4,200 still exist. But their market share has declined dramatically. These smaller banks now face significant challenges:
- Regulatory Burden: Same compliance requirements as megabanks, but without economies of scale
- Technology Costs: Expensive to compete with megabank mobile apps and digital services
- Talent Competition: Difficult to attract top talent against megabank salaries
- Customer Expectations: Consumers expect 24/7 digital banking
Despite consolidation, community banks (under $10 billion in assets) still provide about 60% of small business loans and are often the only banking option in rural areas. They tend to make more personalized lending decisions based on relationship rather than algorithm.
Since 1994, community banks' share of the U.S. lending market has fallen by approximately half – from 41 percent to 22 percent – while the top five largest banks' share has more than doubled – from 17 percent to 41 percent.
Read Full Report →
When they created 'too big to fail,' they also created 'too small to succeed.' Many community banks are finding it increasingly tough to survive, in part because they must commit more of their limited resources to comply with new regulations.
Dallas News Coverage →
The Consequences of Consolidation
The scale of today's megabanks is staggering. To understand how big banks have truly become, see our detailed overview comparing bank assets to entire country GDPs. You can also explore our global banking statistics and bank rankings for a complete picture.
For Consumers
- Fewer choices in banking services
- Less competition can mean higher fees
- More impersonal service (algorithmic decisions)
- Reduced access in rural and underserved areas
For Small Businesses
- Large banks less likely to make small business loans
- Relationship banking has declined
- Standardized loan criteria may not fit unique situations
For the Economy
- Increased systemic risk ("too big to fail")
- Political influence concentrated in few institutions
- Less geographic diversity in lending decisions
- More vulnerable to coordinated failures
Looking Forward
The trend toward consolidation shows no signs of reversing. While some argue that large banks are more efficient and stable, others warn that concentration creates systemic risks and reduces competition. The debate continues about whether to break up the largest banks or accept the current structure with enhanced regulation.
Sources & Further Reading
- FDIC Community Banking Study 2020 - FDIC Research Department
- The State and Fate of Community Banking - Harvard Kennedy School
- Too Small to Succeed - Dallas Morning News
- Money, Power and Wall Street - PBS Frontline Documentary
- Community Banking Research Program - FDIC
- Historical banking data from FDIC Historical Statistics on Banking
Frequently Asked Questions
How many banks have disappeared in America?
Over 10,000 banks have disappeared since the 1980s. The US had approximately 14,500 banks in 1984, compared to about 4,200 today. Most disappeared through mergers and acquisitions, not failures.
What caused bank consolidation?
Major causes include deregulation (especially the 1999 repeal of Glass-Steagall), the S&L crisis of the 1980s, the 2008 financial crisis, technology economies of scale, and regulatory compliance costs that burden smaller banks disproportionately.
What percentage of deposits do the biggest banks control?
The top 4 US banks now control approximately 44% of all US deposits, compared to just 15% in 1984. This represents a tripling of concentration in four decades.
Are community banks still important?
Yes, despite consolidation. Community banks still provide about 60% of small business loans and are often the primary financial institutions in rural areas. However, their market share has declined significantly.