Since the financial collapse of 2008, the nation’s largest banks have seen their profits boom, as their share of the market has grown. Reuters reports:
Profits have soared since the global financial crisis at the five biggest U.S. banks with market-making dealing operations, New York Federal Reserve economists said in an article released on Wednesday.
From 2009 to 2014, the combined net income of J.P. Morgan, Citigroup, Bank of America, Goldman Sachs and Morgan Stanley annually averaged $41.73 billion, up from annual average of $25.08 billion from 2002 to 2008, they said.
Meanwhile, community banks are suffering. Why? Because the Democrats’ Dodd-Frank law is killing them, even as it boosts their biggest competitors. ValueWalk headlines: “Dodd-Frank Hurting Community Banks: Harvard Study.”
A recent study from the Harvard Kennedy School takes a closer look at the long-term plight of community banks (defined as banks with less than $10 billion in assets) in the U.S. Authors Marshall Lux and Robert Greene examine the issue using FDIC data to analyze the factors behind the decline in community banking — including over-regulation — and suggest policy alternatives that could help the community banking industry get back on its feet. …
Lux and Greene highlight the growing crisis in the community bank sector. The lending market share of community banks has dropped from above 40% in 1994 to around 20% at the end of 2014. Of note, community banks came out of the financial crisis with a 6% decrease in market share, but since the the passage of the Dodd-Frank Act, their share of U.S. commercial banking assets has declined at a rate almost double that between the second quarters of 2006 and 2010.
The decline in community banking has hurt small business:
The authors note: “Particularly troubling is community banks’ declining market share in several key lending markets, their decline in small business lending volume, and the disproportionate losses being realized by particularly small community banks.”
The problem, the Harvard authors conclude, is largely due to poor regulation.
That is, it is poor regulation if you care about small businesses and the economy as a whole. But the Democrats have other priorities: they are corporatists, who want to favor a few big firms that the government can then control. Dodd Frank has been a disaster, but not for the nation’s biggest banks, and not for the Democratic Party.