http://online.wsj.com/article/SB10001424052748703834604575365261735827600.html Bank of America Corp., J.P. Morgan Chase & Co. and Wells Fargo & Co., which hold about $3.50 of every $10 in local deposits, are "squeezing" and "hoarding" customers "any way they can," says Jeff Wagner, chief financial officer at Florida Business Bank. Corporate customers are being told by the biggest lenders... [more]
http://online.wsj.com/article/SB10001424052748703834604575365261735827600.html
Bank of America Corp., J.P. Morgan Chase & Co. and Wells Fargo & Co., which hold about $3.50 of every $10 in local deposits, are "squeezing" and "hoarding" customers "any way they can," says Jeff Wagner, chief financial officer at Florida Business Bank. Corporate customers are being told by the biggest lenders not to move their deposits to other banks or else they might not get a new loan, he says.
Fortified by infusions of taxpayer capital and takeovers of other large institutions killed or wounded in the crisis, a handful of hulking banks is emerging from the mess to dominate everything from mortgages to checking accounts to small-business loans. The financial-regulation law will bring new shackles and oversight, likely to cost the big banks billions in revenue. But their growing supremacy will help them absorb the blow.
Bank of America, J.P. Morgan and Wells Fargo now have 33% of all U.S. deposits, up from 21% in mid-2007—the fastest shift of such a large chunk of deposits in U.S. history. Much of the gain came from their acquisitions of Countrywide Financial Corp., Washington Mutual Inc. and Wachovia Corp., respectively.
The three huge banks made 57% of all home mortgages in the first quarter, up from 28% in 2008, according to Inside Mortgage Finance, an industry newsletter. In 2008 and 2009, they got $95 billion in capital from the U.S. government, all of which they have repaid.
"At the end of the day, consumers and small businesses will benefit" from consolidation, says Bank of America executive Mark Hogan, who runs retail branches on the East Coast.
To keep their costs down, however, the big banks generally pay lower rates on certificates of deposit and other types of savings products than the small players, meaning less interest income for millions of depositors.
"Concentration on the national level is something that ought to be of concern to policy makers" because it means "fewer choices and less-competitive pricing" for small businesses and consumers, says William Isaac, the chairman of the Federal Deposit Insurance Corp. from 1981 to 1985.
Possibly even worse, the consolidation puts more risk "in fewer and fewer hands, so when mistakes are made, they are doozies."
Bank of America, J.P. Morgan and Wells Fargo "can make money beyond belief" because of their low costs and volumes of scale, and "there is no chance of anyone challenging them," says Arnold Danielson, a bank analyst in Bethesda, Md.
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