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All of the rules put in place after 2008 are being ignored; the number of banks in the US pre-2008 financial crisis was about 31k. Now there are close to 3000. After this wave of mergers, there might be around 1000!

And a few will be so large that they can make insane bets, betting on risky and novel new investment vehicles that will (maybe initially) pay off handsomely before ultimately failing dramatically. This will make "too big to fail" look quaint by comparison and the banks will end up owning everything.

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Your numbers are wrong.

1974: ~14,000 banks

2008: ~7,000 banks

2023: ~4,000 banks

This has been a steady decline since 1974 (not 2008) in the US.

https://banks.data.fdic.gov/explore/historical?displayFields...

As a comparison, Canada only has 34 banks.

https://en.m.wikipedia.org/wiki/List_of_banks_and_credit_uni....

EDIT:

In case anyone is curious, these are the credit union numbers.

1981: ~7,000 credit unions

2010: ~7,000 credit unions

2023: ~5,000 credit unions

https://ncua.gov/about/historical-timeline

It goes back farther than that. In 1911 there were 29,000 banks. The Federal Reserve Act passed in December of 1913. By 1915 there were 19,000 banks. The expansion of credit in the 1920s cause a surge in new banks reaching more than 29,000 again. When the credit fueled stock market crashed in 1929 many banks closed. By 1933 there were about 14,000 banks. Each business/credit cycle the number of banks grows when credit is easy and collapse and consolidate as loans default. Each cycle results in more consolidated banks. Nation wide credit cycles would not be possible without the Federal Reserve pulling the interest rate lever.

https://www.fdic.gov/about/history/timeline/1900-1919.html https://www.bis.org/publ/work137.pdf

More importantly, there are really only five major banks in Canada - RBC, TD, Scotiabank, BMO and CIBC. National Bank is a close #6, but is really only big in Quebec. Those five are the lion's share of the banking industry, especially when you consider that they own a number of the other banks (Scotiabank owns Tangerine, for example). The other banks are niche regional banks or for specific purposes (i.e. Home Bank business is largely selling GICs and lending mortgages, without much else).

The list only includes "bank"s, that are federally-regulated entities. The biggest provider of banking services in Quebec is Desjardins, but it doesn't appear in the list because technically it's not a bank and it is regulated provincially not federally. Also depending on how you want to count it, Desjardins is either one entity or an ensemble of 210 credit unions. Similarly, ATB gets an honourable mention, but other non-bank providers of banking services such as First Calgary Financial or Vancity (both credit unions) are not shown in the list.

It's interesting that in the US, even small banking service provides are banks. But in Canada, small ones tend to be provincially regulated entities such as credit unions. It's not that small entities don't exist. They just belong to a different list.

The claim/lie that there were "over 30,000 US banks just 10-15 years ago, it's now less than 3000, and they are all about to fail" is disinfo that is being pushed hard on twitter and reddit. On reddit it seems to be r/Sino regulars brigading financial subreddits but on twitter it seems to be accounts that are very supportive of a former US president.

You guys should be flipping cars when bank execs didn't get jail time for the financial crisis

Well America has plenty of outrage, but they're utterly divided and most that outrage just goes into poopooing the other side, instead of something productive like real demonstrations and protests with a real purpose. Instead we get outrage protests mainly designed for extremist groups to waste their time fighting eachother and playing at civil war.

America needs a leader who can inspire people to work with each other even when they don't agree on everything. I am quite sure you can build a significant coalition around financial issues, maybe even bigger than a super majority. But somehow people are not willing to work with each other unless they pass each other's purity tests. Thus, nothing changes and the status quo wins every time.

That will never happen in our lifetime.

Democrats can't do it, because Republicans will never cooperate with a Democratic Party president.

Republicans can't do it, because they will continue to nominate a culture warrior whose only job is to fight wokeness, so they aren't even interested in it.

This thing will keep escalating, relatively slowly, until it finally crosses the line and even the Republicans will figure out that maybe they ought to have some accountability.

My guess it will take minimum of two generations.

My guess is that it will take a lot more than that, the USA needs to have a political system less reliant on boatloads of cash. Campaigns are spectacles, not political debate, spectacles are great entertainment but are very poor to foster any discussion around hard topics and solutions.

America's love of a good show made even politics like a big sport, team red and team blue against each other, fighting tooth and nail for turf (aka districts, electoral votes by States, etc.) and the team that is better funded usually will have a leg up. Just like sports.

The cultural change required to move politics away from this culture of spectacle and entertainment is way harder than what can be achieved in two generations.

And we aren't even moving away from this, we're moving farther and farther into it.

I agree, if this was to happen it will have to happen with a third party. But America seems to be allergic to any third parties.

For the longest time I used to think that the two party system is like a law in America or something. Like China has a one party system. When I learned that it isn't, i spent a considerable amount of time confused as to why then in all political discourse is the two party system so... enshrined. Some say if you listen to me closely, I'm still confused about this. I come from a country which routinely has 20 parties in different levels of government each with significantly different agendas (or at least we used to, sigh...). Why is this not the case in America? It seems to me that everyone is dissatisfied with their party, yet they don't want to support anything else. For a country which prides itself in its entrepreneurship and startup culture, the reluctance in supporting innovation in politics is so surprising.

Edit: btw, i disagree with you that Republicans will "start" to hold their leaders accountable. From an outsider perspective, the Republican party seems to be achieving their targets and GoP members are more active than Democratic party members. I may disagree with most of their social and financial goals, but I will acknowledge they are effective and there are severe consequences on failure.

> For the longest time I used to think that the two party system is like a law in America or something.

Not a law of the state, but a law nonetheless: https://en.m.wikipedia.org/wiki/Duverger%27s_law

It's the First Past The Post voting system that leads to two parties.

My country also has a first past the post system. We still had several parties. In fact till about 15 years ago all states had their major parties which had significant presence in the federal parliament too. I don't think this is a valid explanation

And what's the situation now?

Your country could gradually he heading towards a two party system.

No we are heading to a one party system. But that has nothing to do with first past the post. There are several historical and social reasons for that.

That FPTP results in a long-term two-party equilibrium (that may be occasionally disrupted) is not exactly a secret:

https://en.wikipedia.org/wiki/Duverger%27s_law

And in some cases, at least, FPTP itself is deliberately introduced by large parties to reduce the viability of their competitors. Northern Ireland was one particularly nasty case of that.

> But that has nothing to do with first past the post.

You could be right, but how do we know the polarizing effect of FPTP isn't contributing to this change?

Everything is contributing to it. Our dietary preference contribute to this more than the FPTP system. My country is going through a dark period, and the way our elections are held has very little to do with it.

I'm sorry to hear that. No one wants to live under a one-party system.

Do you live in India?

You can only think this if you ignored all of the protests in 2008. What America has is a population that doesn't get a say in American policy, unless there's some indirect sales risk for some powerful person who supports the policy (i.e. somebody is afraid that if the policy is passed, than sales at e.g. Kia or AB InBev will drop because of their association with it.) Even this can be completely thwarted by industry collusion.

That was what Occupy Wall St and Tea Party movements were. Remember that? Before each of them got infested with social-issue parasites of each pole, both were populist reactions to financial injustices.

Occupy was suppressed by the entire police state, coordinated at the federal level under the FBI and DHS [0].

[0]: https://www.theguardian.com/commentisfree/2012/dec/29/fbi-co...

I feel like the most significant cause of Occupy's burnout was the fact that it was so poorly organized and had no concrete goal. I don't recall any specific legislation or reform that they were calling to enact and there was a cacophony of voices each calling for some kind of societal revolution. Eventually the local Occupy demonstration turned into a homeless encampment with some signs propped alongside the roadway. I certainly won't deny government meddling but I honestly think the movement was doomed from the start.

https://www.youtube.com/watch?v=ahMGoB01qiA

Peter Schiff did a man on the street with some folks of the Occupy movement, and basically proves your point - the desired goals were so scattered and sometimes even contradictory.

I remember this comic that ridiculed the "Occupy Wall Street doesn't have a goal" talking point, one of the many corporate-pushed talking points meant to discredit the movement: [1]

1: https://images2.dailykos.com/i/user/2722/TMW2011-10-12colorl...

I feel like the movement could have overcome the "corporate talking point" by actually having an organized and focused goal.

When there is concerted effort to undermine a populist movement, that's how it will end up looking: disorganized, chaotic, unproductive, and eventually dead. It very well could have failed due to deliberate interference where it might have had a substantial impact otherwise. How much would you bet that there weren't covert agents working to put it down?

I don't know if it was from infiltration, or what, but one of the biggest talking points of Occupy was that they were a leaderless organization, and they would establish rules of order that required near unanimous consensus to make decisions. That's a great way to avoid making any decisions.

At some point, it starts to feel intentional that every time an issue that could bring us together begins to gain traction, it’s diverted into some media concocted idea about how (left wing or right wing group) is out to destroy (social thing).

It's only starting to feel intentional, eh? While it may not be a result of coordinated and direct pressure, like a secret ban on promoting non-partisan popular causes or something... I don't believe for a minute that our cultish, deadlocked political landscape is just an emergent phenomenon resulting from good faith participation in our system. It's the result of powerful people and institutions throwing around their weight, buying allies and generating propaganda, in order to dominate and shape said system.

Occupy Wall Street was the beginning of that but the media and their allies in the government decided to push for a race war in the 2012 election. It’s not a coincidence the oppression Olympics were turned up to 11 at that time.

That’s not to say that there aren’t issues with race in America but they pale in comparison to the socioeconomic ones. A nation obsessed over race and culture has little time to confront other issues.

Race is the modality by which class is primarily expressed in America. There is no way to resolve socioeconomic problems without dealing with race at the same time, clearly demonstrated multiple times in US history. The failure of Reconstruction -- an "Unfinished Revolution" as Eric Foner puts it -- was precisely white workers' rejection of class solidarity with Black workers in favor of post-war white racial reconciliation.

Crab mentality and revenge seeking will keep people from true progress. We need to crush the idea of victim hood as a privilege.

> We need to crush the idea of victim hood as a privilege.

"Victim hood as privilege" is a right-wing strawman of the idea of intersectionality. You're suggesting throwing a punch at an obvious feint.

Intersectionality is simply the idea that certain groups experience unique configurations of more general problems, and that counteracting those configurations contributes to resolving the general case.

Do you think a coal miner with black lung who organizes for compensation on that basis is claiming "victim hood as privilege"? I hope not. It should also be clear that coal miners organizing for their own workplace safety helps ALL workers. That's why OSHA exists after all.

The same applies to racial issues.

And most people are oblivious to this simple observation, allowing the situation to continue. Feels like the war is already lost a long time ago.

It was called Occupy and it got shut down with extreme prejudice and we're still living in the psyop environment that is a response to it.

Eh. We still have our entertainment and comforts to distract us. But with the greater and greater divide between the haves and have nots flipping cars might look tame when things change.

That’s hardly effective and those cars belong to other citizens, who would just then hate you and never support your ‘cause’. Tantrums don’t get rewarded.

America does not seem to be a place of collective action (anymore?). Instead everybody is blaming themselves and each other, fuelling a mental health crisis and social malaise. It's not pretty to watch.

I don't think destroying the property of innocent others would help.

We're talking about sins so great that it defines the lives of every younger generation after 2008. It's just as unconscionable as the Iraq war and long term occupation of Afghanistan. Our lives are short and a lot of people have been robbed of time.

The American banking system is highly regulated in spite of some of the things you'll read here and other places. It's very hard to start a bank, and banks only allow some products because of regulation. The problem comes when the politicians slide into the back pocket of the bank execs who are all too happy to keep the status quo. In that respect the politicians are just as guilty as the bank execs.

>flipping cars when bank execs didn't get jail time for the financial crisis

It wouldn't have done any good. Those that benefitted would have started flipping houses anyway.

All numbers approximate:

- Number of banks in the US: 4,844 (69,500 people / bank)

- Number of banks in the UK: 365 (184,000 people / bank)

- Number of banks in Australia: 95 (272,000 people / bank)

- Number of banks in Japan: 199 (628,000 people / bank)

Let's cool it with the doomsday talk. Every major economy (except maybe China, but they're weird so not counting them) has 2.5x+ the number of people per bank than the US. The US is the weird one.

If you want to look at this from a "return to fundamentals" perspective: the US is only a few hundred years old, and was built on some of the most virgin, rich, plentiful, resourceful land on the entire planet. That fueled 300 years of economic development the likes of which the world has never seen; and the nice thing about growth is that it really helps cover-up bets that were far too risky for any reasonable risk-taker.

We're not going to see big banks take on increasingly higher risk over the next decade. In fact, we'll see the opposite. Fewer banks, more regulation, and less risk taking, as the US begins to regress more to the worldwide economic growth rate.

Where did you get these numbers? It's wrong and presents a misleading picture of a 10x implosion in 2008. There were never even close to 31k banks in the USA. It peaked at about 14k back in the '80s and has been going down ever since. It did drop precipitously after the 2008 crises, going from around 7K banks to today around 4500 banks, but this is a very far cry from 31k to 3k.

https://banks.data.fdic.gov/explore/historical?displayFields...

Financial speculation is zero sum, isn't it? So the fewer banks there are the more each one gets exposed to both sides? Your bank provides services for a person who monopolises some commodity, you have billions to loan out; but all your millions of other customers are hit by the price of that commodity and all deposit less, wiping out any increase in deposits.

Doesn't that mean unless they are specialised banks, that they necessarily must lose?

Maybe an economist can correct or confirm my instinct here?

Why would financial speculation be zero sum (or how do you define financial speculation here)?

Some financial speculation is zero sum, other is not. E.g. if a bank takes on a lot of clients with risky mortgages, both risk and possible gains are only on this bank. (Barring possible bail out, contagion risk etc)

> Financial speculation is zero sum, isn't it?

Only if you play fair. If you can be bailed out it's no longer zero sum.

As an outsider, can you help me put your post in context - is 31k banks posit as good or bad state of things?

(it seems an insane state of things to me, with incredible overhead and inefficiency but again, I'm an outsider. I've lived in USA for a while in late 90s and state of banking from consumer perspective in USA seemed a decade behind Canada and Europe, but that was a long long time ago)

I see less banks as being strictly worse. It's the same as with any other company. Yes that's less efficient, but it's the only way to prevent individuals from having too much power. Because almost anyone with that kind of power will eventually give in. Just look at tech companies; I, for one, am not satisfied with the status quo.

There are two ways to have a functioning society. One is to have very few very powerful people, and only choose the right leaders. The other is to have very many people with very little power. That's less efficient, but it's also much less risky.

We currently run on the first. It's not going well. I'm not aware of a time when we ran on the second. In my mind that's the only way.

I have trouble following this logic. Monopolies are obviously bad, but, 1000 banks sounds like an extremely diverse ecosystem.

Canada has like 40 banks and strong regulation has kept them out of crises like in 2008.

What’s the right number of banks per capita?

> Canada has like 40 banks and strong regulation has kept them out of crises like in 2008

Canada secretly bailed out their banks to the tune of $114 billion CAD in 2008. If you compare Canada's secret bank bailout to the US equivalent on a per capita basis it looks even worse. [0]

The reason we didn't hear about it at the time is that the big 5 Canadian Banks have so much power over the government and the media that they were better able to control the narrative.

Concentrating power in the hands of a few banks is a bad idea.

[0] https://www.cbc.ca/news/business/banks-got-114b-from-governm...

Easy to keep banks out of crises during good times.

That seems a bit backward when banks can so easily be the cause of bad times.

Am I too tinfoil hat to think the big 4 planned it like this all along? I guess one could ask why WOULDN’T they have meetings trying to engineer exactly what is happening?

That doesn't really explain anything though. Every business is always trying to gain marketshare. The question then is why they are succeeding now and not before. Nobody forced SVB to put all their money into 10-year treasuries, nor did anybody engineer the tech-industry recession we've been going through (JPMC is big but Apple, Microsoft and Amazon are each bigger), both of which contributed to SVBs demise. Also the big banks tried to rescue First Republic a few weeks ago; not impossible that was some weird 4-D chess move but much more likely it was just a bailout that failed.

If I had to guess, it's less so "planned" and more so that the various institutional and regulatory incentives make this sort of outcome extremely likely.

I think this hits the nail on the head. I think after 2008 they setup a system (set of regulations/rules/policies not some group of monocle wearing dudes in a room scheming) where the BigBanks will eat the SmallBanks, the FDIC will insure what they do and some Federal agency will eat the SmallBank failures and then BigBank can swoop in as a "savior" essentially consuming SmallBank but all that is left is the profitable parts at that point.

Use a local credit union instead of a bank.

Well, to accomplish something like that, they'd have to have hundreds of (past, present, and future) employees, dotted over dozens of institutions (media, regulatory and political).

They'd need the tacit permission of the other industries their owners are invested in.

And, they'd need tremendous amounts of capital. Plus a history of grand collusion and unethical behavior. And leverage against anyone that might call them out.

So... I've got nothing. I will say that failing to investigate this possibility seems naive; as would expecting a genuine investigation.

I think you are too tinfoil hat to think they planned it. They don't need to engineer what is happening, it was obviously going to happen at some point. They could have targeted some banks (active, hard), or they simply could have realized that a percentage would fail when rates went up, so they got in a position to do well picking up the pieces. And then they acquire whatever fails.

I'm willing to take my downvotes on this, but as someone who works in an industry that has been working for 14 years to set up an alternative to this system, and which feels like it's under systemic, engineered threat at the very same time this is happening, I think your tinfoil hat is stylish, and appropriate for the season and weather.

yes, and now they are "attacking" PacWest, whose stock is plummeting like First Republic

its an easy cycle - find a bank you want for nothing, feed bad press through the usual outlets, watch it fall, then watch depositors get spooked, then buy it for nothing

First Republic is probably just one of many banks intended to be undermined, trashed, and then sold for nothing

and remember all the times First Republic's CEO came out and defended his business as it was collapsing? me neither...makes you wonder...

Am I wrong in thinking that all banks should have no exposure to the stock market period?

The whole being able to trigger aggregate indebtedness violations through synthetic shares (options), seems like a systemic risk that no ones paying attention to.

Also, its hard to say we still have a fractional reserve system when required deposits have been set at 0% since the pandemic. There's no fraction, its 0 unless you change the definition (i.e. Basel III which uses capitalization as deposits).

What exposure to the stock market are you talking about?

Any bank with a ticker on a market. Technically no security on the market is safe from this mechanism. Banks are particularly vulnerable.

With a properly timed news drop, shorting, and forcing the market maker to exit delta-hedging (due to volatility) you end up having them create synthetic shares that in addition to the loaned shorted shares push the price downwards (because there will always be more shares since they were created via the contracts and are not constrained by short limits/availability and float). The market maker may even participate to offset losses.

Once the capitalization rate falls below a certain threshold you get aggregate indebtedness violations. At which point any loans they might have had create a liquidity event (i.e. frozen), which must be paid back and price levels returned to normal within 30 days (Basel 3), or 2 months (Nasdaq).

It creates a spiral which can't be recovered from, they will bleed deposits, and then the regulator will seize them, and sell their assets to one of the survivor banks for pennies on the dollar (with guarantees). Another form of bailout.

This is what largely happened with FRC, and now its starting to a lesser degree (a/o last night) other regional banks.

What "capitalization rate" (?) that banks use includes the publicly traded share price in its calculation?

Two mechanisms,

* Basel 3 counts capitalization as capital reserves instead of the normal deposit reserves we expect in fractional banking, this was adopted just recently (which is why the Fed site shows 0% deposit requirements).

If your reserves dip under the requirements you have 1-2 months to correct (from what I've read, although I'm not an expert and its very legalese, and dense so don't take that as advice). Basel is very opaque compared to Federal Reserve reporting in my opinion.

* Aggregate Indebtedness violations have to do with the SEC and market's net capital rules. In the case of SBLOCs or Securities backed loans, sudden drops in capitalization from price action can trigger illiquidity as any existing revolving credit can be frozen, and interest on utilization can balloon in addition to any further ballooning that might occur as a result of rating downgrades (S&P/Moodies).

Either are directly impacted by the company capitalization which is based on current ticker price and the shares outstanding.

Maybe you are confused by the words "common stock" in Basel 3 or something -- that's in the stockholders' equity line, book value, and is not defined by the market price of the company's own common shares.

(For example, you can look at PACW's Q1 press release, and see its Tier 1 capital ratio not getting cut by 2/3 by the precipitous drop in share price they endured: https://www.pacwestbancorp.com/news-market-data/news/news-de... )

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