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Photo: Community Bank Borrowers
Featured Article filed under Banking, Independent Business | Written by Stacy Mitchell | No Comments | Updated on May 5, 2015

One in Four Local Banks Has Vanished since 2008. Here’s What’s Causing the Decline and Why We Should Treat It as a National Crisis.

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/vanishing-community-banks-national-crisis/

This article was co-published with Yes! Magazine.

Here’s a statistic that ought to alarm anyone interested in rebuilding local economies and redirecting the flow of capital away from Wall Street and toward more productive ends: Over the last seven years, one of every four community banks has disappeared. We have 1,971 fewer of these small, local financial institutions today than at the beginning of 2008. Some 500 failed outright, with the Federal Deposit Insurance Corporation (FDIC) stepping in to pay their depositors. Most of the rest were acquired and absorbed into bigger banks.

To illustrate this disturbing trend and highlight a few of the reasons we should treat it as a national crisis, we’ve published a trove of new graphs. These provide a startling look at the pace of change and its implications. In 1995, megabanks — giant banks with more than $100 billion in assets (in 2010 dollars) — controlled 17 percent of all banking assets. By 2005, their share had reached 41 percent. Today, it is a staggering 59 percent. Meanwhile, the share of the market held by community banks and credit unions — local institutions with less than $1 billion in assets — plummeted from 27 percent to 11 percent. You can watch this transformation unfold in our 90-second video, which shows how four massive banks — Bank of America, JP Morgan Chase, Citigroup, and Wells Fargo — have come to dominate the sector, each growing larger than all of the nation’s community banks put together.

“If we continue to go down this path, we’ll kill this concept of relationship banking,” contends Rebeca Romera Rainey, the third-generation CEO of Centinel Bank in Taos, New Mexico. Like other community banks, Centinel makes lending decisions based on its relationships with its customers and deep knowledge of the local market. It underwrites a wide range of business loans and home mortgages to local families. Many of these borrowers would likely not qualify for big-bank financing because they do not fit neatly into the standardized formulas megabanks use to evaluate their risk of default. Continue reading

Wall Street photo
Featured Article filed under Banking | Written by Olivia LaVecchia | No Comments | Updated on Aug 20, 2014

Federal Study Confirms “Too Big To Fail” Gives Megabanks a Hidden Funding Advantage

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/federal-study-confirms-too-big-fail-megabanks-hidden-funding-advantage/

When the country’s giant banks were teetering on the verge of collapse during 2008’s financial crisis, the U.S. government stepped in to bail them out. The banks were, in a phrase that has since become infamous, “Too Big To Fail.” Would the government do it again? And does the expectation that it would step in give megabanks an unfair competitive advantage over local community banks? Those are the questions at the heart of an eagerly awaited report released at the end of July by the Government Accountability Office, a nonpartisan federal department. In a conclusion that highlights the need for more regulatory action to reduce concentration in the banking system, the G.A.O. found that the answers to both questions are “yes.” Continue reading

sojourners-cover
Featured Article, ILSR Press Room filed under Banking | Written by ILSR Admin | No Comments | Updated on Apr 1, 2012

Banking For the Rest of Us

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/banking-for-the-rest-of-us/

In this cover story for Sojourners Magazine, Stacy Mitchell writes that there is remarkably little evidence to support the idea that bigger banks are superior. They have come to dominate, not because they are more efficient or offer better services, but because they have rigged government policy in their own favor. It’s time for a new set of rules—banking policies for the 99 percent. Continue reading

Photo: neighborhood business
Featured Article, Resource filed under Banking, Independent Business | Written by Stacy Mitchell | No Comments | Updated on Apr 16, 2014

Understanding the Small Business Credit Crunch

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/understanding-small-business-credit-crunch/

Even as their big competitors are awash in capital, many locally owned businesses are struggling to secure the financing they need to grow. A new ILSR analysis has found that, since 2000, bank lending to large businesses is up 36 percent, while small business loan volume has fallen 14 percent and “micro” business loans — those under $100,000 — have plummeted 33 percent. Continue reading

Home of the Economy
Featured Article filed under Banking | Written by Stacy Mitchell | 1 Comment | Updated on Sep 15, 2011

How State Banks Bring the Money Home

The content that follows was originally published on the Institute for Local Self-Reliance website at http://www.ilsr.org/how-state-banks-bring-money-home/

One of the most significant consequences of the consolidation of banking over the last decade is how much it has hindered the economy’s ability to create jobs. There’s no single solution to this problem, but one of the most promising strategies involves creating state-owned banks that can bolster the lending capacity of local banks, helping them grow and multiply. Continue reading