Thread by @oscarthinks

Alright, fine. I admit, there is one aspect of “the good ‘ole days” that I wish we still had today.

@federalreserve c. 1932: fraser.stlouisfed.org/files/docs/his…

Omg this is like a fantasy world

Holy balance sheets batman, rural banks and big city banks used to have a SYMBIOTIC relationship that supported access to credit in rural areas

Silently, below the radar by design, a few speculative investors saw the potential in grabbing up small bank stock over time until they had control. It all appeared above-board but even some in the banking industry were noticing the trend & feeling anxious about it.

Imagine the Secretary of the Treasury saying prohibitions against big banks should be so explicit they could be easily enforced and impossible to misinterpret with shitty regulatory guidelines.

Except wait you don’t have to imagine you just have to go back to 1911…

The roaring ‘20s stock market boom also had some small bank shareholders wanting a piece of the pie, so they would sell to a big city bank in their state, effectively exchanging their little bank shares for big bank shares they could sell on the booming stock market.

1929 and the Great Depression put a pause to all that, but the @federalreserve researchers anticipated that forces for banking concentration would resume under normal conditions less they provided “another direction.”

Corporate consolidation outside the banking sector had the symptom of generating demand for services of larger banks.

While some industry shifts & changes are always going to be due in part to technological advances, not all consolidation is an inevitable result of technology.

The more things change...

A hundred years ago, Delaware was already *the* place to register an anonymous company — in this case bank holding companies created as part of owning & controlling one or more banking institutions that are chartered & headquartered elsewhere.

Of course of course it wasn’t all hunky-dory. “Legitimate” in the context of this time, the 1930s, most definitely was a euphemism for race & gender more than anything else.

Women couldn't get a loan w/o a husband’s signature till 1974.

Meanwhile, #redlining is still a thing.

Daaaaammmmmmnnnnn here's some ***shade*** from the @federalreserve research team in the 1930s, on the insistence from consolidated banks that they were somehow still making lending decisions on the same localized basis they were before consolidation…

Okay back from lunch and some other meetings.

The 1930s. When the Fed sounded like...a polite version of left-wing propogandists???

The research that went into this paper had been conducted over the preceding decade, so legislators took much of the insights contained therein to craft the Banking Act of 1933, also known as Glass-Steagall, which famously separated commercial banking from investment banking.

Also famously, the 1933 bill created the @FDICgov in part as a boost to community banks.

Not so famously, that same bill also for the first time recognized bank holding companies and put them under the regulatory oversight of the @federalreserve.

federalreservehistory.org/essays/glass_s…

But over the following decades, big banks found more ways around the regulatory system that was meant to work against the consolidation of the banking sector. The Bank Holding Company Act of 1956 provided more oversight power meant to cope with that. federalreservehistory.org/essays/bank_ho…

But over the next few decades, due to political changes that culminated in the 1980s, big banks continued lasting the ground work. By 1990, 46 states had changed their laws to permit out-of-state bank holding companies to acquire banks within their borders.

By 1994, under a Democratic administration, the big bank legislative takeover was complete as the Rievle-Neal Interstate Banking Act provided a legal framework for bank holding companies to acquire banks in any state starting in Sept. 1995. federalreservehistory.org/essays/riegle_…

And thus began the gradual disappearance of thousands upon thousands of small banks across the country.

Data via @stlouisfed

fred.stlouisfed.org/series/US100NUM
fred.stlouisfed.org/series/US13NUM
fred.stlouisfed.org/series/US31NUM
fred.stlouisfed.org/series/US115NUM
fred.stlouisfed.org/series/USG15NUM