banking system

Reviving Bank Antitrust

By Jeremy C. Kress (University of Michigan)

After decades of disuse, antitrust is back. Renewing the United States’ longstanding distrust of concentrated economic power, antimonopoly scholars have documented widespread harms of corporate “bigness” and inspired policy initiatives to deconcentrate the U.S. economy. To date, however, the new antitrust movement has largely overlooked a key cause of commercial concentration: the rapid consolidation of the U.S. banking sector.

More than 30,000 banks served local communities a century ago, but today just six financial conglomerates control half of the U.S. banking system. Bank consolidation, in turn, has spurred conglomeration throughout the economy. As the Supreme Court recognized in 1963, “Concentration in banking accelerates concentration generally.”

This Article contends that scholars and policymakers have neglected bank antitrust law for the past forty years and thereby encouraged excessive consolidation in the banking sector and the broader economy. It argues that policymakers’ current approach to bank antitrust—premised on consumer welfare—has failed in two critical respects. First, it has failed on its own terms, as bank mergers have increased the cost and reduced the availability of basic financial services. Second, because of its narrow focus on consumer prices, the prevailing standard has ignored numerous non-price harms stemming from bank consolidation, including diminished product quality, heightened entry barriers, and greater macroeconomic instability.

To correct these shortcomings, this Article proposes a roadmap for reviving bank antitrust. It recommends strengthening the analytical tools used to identify anticompetitive bank mergers and rejecting a narrow focus on consumer prices in favor of a more comprehensive analysis of the costs that bank consolidation imposes on society. Reviving bank antitrust in this way is critical to enhancing competition in the financial sector and throughout the U.S. economy.

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