Thread by @stacyfmitchell

Continued concentration in the banking sector is killing the growth of new & small businesses. The reason is that giant banks devote only a sliver of their assets to small business loans. As they gain control of more of the industry, small business lending shrinks. 1/

Here’s another way to look at what’s happening. First, let’s look at market share. Small and mid-sized banks and CUs have shrunk to just 16% of the banking sector! That’s down from half a generation ago. 2/

Yet small and mid-sized banks and CUs still account for more than half of all small business loans. 3/

Why do giant banks do so little small business lending? They’re not very good at it. Compared t local banks, more of the loans they make go belly-up. That’s because they lack the soft, on-the ground, relationship-based information that local banks have in spades. 4/

Today, the U.S. has one-third fewer local banks as there were in 2010. As these banks get bought up and merged into larger banks, the capital available to local businesses declines. 5/

This is a deliberate policy choice that we made. In the 1990s, we overhauled the banking laws to favor bigness. After the crisis, we doubled down on that approach. We chose this path and it’s not serving us very well. 6/

Here’s one example of the policy choices made under Obama. After the crisis, regulators essentially stopped the creation of new local banks. 7/

In the 1990s-2000s, we were replacing about half of the local banks lost to mergers with new local banks. Then we cut off that pipeline. No more new banks. This was partly due to interest rates but also b/c regulators deliberately subjected new banks to more onerous rules. 8/

We’re going to be putting out more later on how concentration in the banking sector is driving concentration throughout the economy, but in the meantime, check out our new graphs, created by @cthaxtonilsr 9/9
ilsr.org/?contenttype=c…