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    Repiglican Roast

    A spirited discussion of public policy and current issues

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    Location: The mouth of being

    I'm furious about my squandered nation.

    Thursday, November 06, 2008

    Just 3 ‘superbanks’ now dominate industry. so much for competition.

    [...]
    Several of the nation's biggest banks have failed or been absorbed by healthier institutions, leaving three giant "superbanks" with an unprecedented concentration of market power: Bank of America, JPMorgan Chase and Wells Fargo.

    While that may be good news for emerging giants and the failing companies they helped rescue, the new oligopoly raises troubling questions about regulation and competition, analysts and consumer advocates say.

    "Bank fees are going up, up, up, and that’s the danger to consumers as more of these banks consolidate,” says Sally Greenberg, executive director of the National Consumer League. “It’s difficult for the average person to get a bank account that doesn’t involve fees, and if you get into financial distress you’re cooked, and you’ll be ‘fee-ed’ to death.”

    According to a recently released banking fee study from Bankrate.com, ATM surcharges rose 11 percent this year to an average of $1.97, and the fee a bounced checks rose 2.5 percent to an average $28.95.

    “Large institutions are impossible to manage prudently, let alone regulate,” says Amar Bhide, a professor at the Columbia Business School.

    In fact, existing federal banking laws say that no bank can have more than 10 percent of the domestic deposit market — a threshold recently surpassed by all three superbanks.

    When asked whether the government would take any action, a Justice Department official was noncommittal.

    “It’s always something we’ve looked at and will continue to look at," said spokeswoman Gina Talamona. "It’s something we’ve looked at as part of our general antitrust review.”

    The reason limits on market share were put in place were so banks didn’t get so big they’d become monopolies that could risk the whole economy, explains Atul Gupta, finance department chair for Bentley University in Boston.

    But now the government appears to be pushing banks in the direction of more consolidation. The Treasury is pouring some $250 billion of taxpayer money into healthy financial institutions, and some of that is being used by stronger banks to snap up weaker rivals.

    [...]

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