Who else thinks the number of banks is shrinking?

The announcement that Wachovia is taking over Golden West Financial has got me thinking.

Where I grew up, in a suburb just outside Los Angeles, there was a major street where you could find almost every major west coast bank.  There were the mega banks, Bank of America, Wells Fargo and Citibank.  There were the mid sized or regional banks like Security Pacific, Union Bank, Cal Fed Bank, Glendale Federal Bank, World Savings, First Federal Bank, Fidelity Federal Bank, Home Savings, Great Western Bank and Lincoln Savings. Small ones like Coast Federal, Hawthorne Savings and Downey Savings.  There was even an international presence with Sumitomo Bank, Dai Ichi Kangyo Bank, HSBC and East-West Bank.

If you drive down that same street today, you'll find the mega banks and the foreign banks, and that's it.  So, where did they all go?

This isn't a new question.  The consolidation of the banking industry has been going on for nearly a decade now.  When I drive down that same street today, I see Citibank, Bank of America, Wells Fargo, Washington Mutual and HSBC.  And I think that's about it.

It didn't happen overnight.  I remember much of this going on about ten years ago.  Cal Fed and Glendale Federal merging in 1998 was pretty big news.  As was the 1992 Bank of America takeover of Security Pacific Bank.  But the 1997 all in one takeover of Washington Mutual taking out Home Savings, Great Western Bank, First Federal and Coast Federal all in one was downright shocking!  Home Savings and Great Western were considered to be two of the larger regional banks out west at the time.  I mean, the Lakers played at the Great Western Forum!

The problems are obvious.  Competition has all but disappeared.  Just like the oil companies, it is not difficult to know what your competitors are charging, and to go ahead and roughly match it.  Amanda at Young and Broke, recently posted that banking has become more expensive.  Gee, why aren't we surprised?

On the flip side, what are the benefits?  Well, we would presume that economies of scale would allow for cost efficiencies, leading to higher deposit rates and lower fees.  Well, we know from the Amanda's post that that hasn't happened.  And what about rates?  Do you keep your savings at a "bricks and mortar" bank like Bank of America or Wells Fargo?  If so, you're losing a lot of money.  The only place to keep your money these days is on-line banks like ING Direct, Emigrant Direct or HSBC.  Yes, the latter two are bricks and mortar as well, but I'm pretty sure you don't get their best rates by walking in to a branch.

Wachovia taking over Golden West really caught my attention for personal reasons.  During college I worked for Glendale Federal Bank as a teller and new accounts rep.  After college I worked for the newly merged Cal Fed Bank.  Golden West was the parent company of those banks.  Citibank came in and took over Cal Fed a few years ago, but the parent company, Golden West, remained in existence to run World Savings.  Now that's gone too, and a part of me feels like the big bad East Coast banks have come and taken away my employment history!

Leave our banks alone!

Something tells me that the cows have already left.  I'm too late.

Oh well, maybe someday Bank of America really will be THE Bank of America.  The feds will come in and split them up with a massive anti-trust suit.  And we'll be back to where we started.

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[Inchoate Random Abstractions]

Jamie Dimon, the CEO of JPMorgan Chase predicted a few months back that we would be down to five national mega banks in the next decade. And he wants to make sure that JPMC is one of the five survivors.