Consolidation of the banking industry is gaining speed, in part because technology increasingly allows routine retail banking functions to be conducted via the internet and cell phones, reducing the need for branch offices. But there is another reason: Government’s indifference to the loss of competition.
The fearless financial journalists Pam and Russ Martens of Wall Street on Parade reported the other day that the Federal Reserve System has approved 3,576 bank mergers and acquisitions in the last 15 years and rejected none.
Connecticut has been the scene of many of these combinations, starting with successful local banks that sold themselves to bigger ones. Manchester provides a good example.
The venerable Savings Bank of Manchester, which once had a branch in every neighborhood in town, was acquired in 2004 in a combination with two other Connecticut banks that became NewAlliance Bank. In 2010 NewAlliance was acquired by First Niagara Bank, which was already a major national bank, and then in 2015 First Niagara was acquired by an even bigger bank, Key Bank from Ohio.
What used to be Savings Bank of Manchester now has only two branches in that town, which no longer has a locally based bank.
Maybe a local base for a bank doesn’t matter as much as it used to, since the internet provides access to banks all over the country, even the world. Local commitment may be lost but convenience gained -- if, of course, the internet is working and nobody involved in the transaction has been hacked.
But don’t try arguing with Mayor Joe Ganim in Bridgeport, where Buffalo-based M&T Bank’s acquisition of People’s United Bank will cost around 661 jobs downtown and another 86 elsewhere in Connecticut. People’s United has been to Bridgeport what Savings Bank of Manchester was to Manchester.
So in protest Ganim plans to move as much as $50 million in city government funds out of People’s United. But the other banks in Bridgeport are nearly all big national banks that, like M&T, are often devouring competitors.
Connecticut U.S. Sen. Richard Blumenthal and Bridgeport state Sen. Marilyn Moore also have expressed indignation about the acquisition of People’s United. Moore wants the General Assembly’s banking committee to hold a hearing about it. Blumenthal says he may appeal to federal and state regulators to stop or modify it.
Indeed, a month ago President Biden directed federal government agencies to start spurring competition in the economy rather than consolidation. Last week two big insurance brokers, Aon and Willis Towers Watson, canceled their merger in the face of the Justice Department’s opposition.
So maybe Blumenthal can get U.S. Attorney General Merrick Garland on the phone about the disaster befalling downtown Bridgeport.
Antitrust law gives the federal government great leverage over mergers. The law leaves much discretion to the government in evaluating degrees of loss of competition, and few companies want to bear the expense of fighting the government in court.
The federal government isn’t the only potential player here. States have their own antitrust and banking laws, and Connecticut’s elected officials never have shown much interest in applying them against combinations that diminish competition. The state well might be able to construe or rewrite its antitrust and banking laws to prevent combinations as big as M&T’s acquisition of People’s United.
State Attorney General William Tong says he is concerned about the bank combination. So it would be good if he reported publicly about whether state antitrust and banking laws can and should be applied against it and whether those laws should be strengthened to curb the consolidation trend.
Bank mergers and acquisitions have made many bank executives and shareholders rich, but much of that wealth has come from the liquidation of competition and jobs.
Just as Willie Sutton robbed banks because “that’s where the money is,” elected officials long have gone easy on banks and financial firms because many campaign contributions originate there. So in the Bridgeport case the smart money will bet on the banks rather than the sincerity and wit of the elected officials piously grumbling about them.
Chris Powell is a columnist for the Journal Inquirer in Manchester.