Why The Biggest Banks Will Only Get Bigger

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The three biggest banks in the country are now bigger than ever, with a combined 31% of all U.S. deposits. Bank of America leads the pack with 10.99% of all U.S. deposits. J.P. Morgan trails only slightly at 10.51%. And Citigroup ranks as the only one of the big three below the 10% cap, with 9.8% of all U.S. deposits.

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What we are looking at right now appears to be the beginning of an unprecedented concentration of banking power in the U.S. that was aided by the destruction of the federal cap on bank deposits. The cap prevented any bank from making acquisitions that would give it more than 10% of U.S. deposits.

But while there are plenty of banks in the system right now, there are few healthy ones of any considerable size. That’s a problem for the federal government, which is facing a wave of expected bank failures.

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It is easy to say that the major casualty in all of this is the federal deposit cap, which was designed to prevent big banks from dominating the landscape.

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But the cap was already dead before this run of forced mergers.

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Nor will the growth of the biggest banks stop here, either in deposits or in assets. J.P. Morgan’s acquisition of Bear Stearns didn’t stop the bank from being tapped by the government to buy Washington Mutual’s assets. Bank of America’s acquisition of Countrywide didn’t stop it from buying Merrill Lynch. Federal regulators are heavily dependent on the largest banks to bail out smaller rivals, and are unlikely to burden other institutions with forced sales. What that means is that the big are very, very likely to get bigger.

http://blogs.wsj.com/deals/2008/09/30/why-...nly-get-bigger/

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But until JPM bot WaMu, we only had one bank above 10%. The feds will need to tap the likes of US Bank or Wells Fargo if they are concerned about significant concentration hits. From my understanding both USB and WF are healthy.