The Logic of Bank Mergers

RISING profits feed mergers, and with accumulating profits in the last few years, the banking industry has resumed a process of consolidation that stretches back at least two decades. The business reasons for marriages like that of Chase Manhattan and Chemical Bank are impeccable.

There's an overall logic to sorting out what has traditionally been a fragmented industry. The regional and state origins of most US banks explain that fragmentation. But a rolling deregulation of banks has been under way since the 1970s, chipping away at the rules that kept them relatively small and insular. At the same time, a huge diversification of financial services has cut into bank revenue, further fueling mergers.

But what about average or low-income consumers who simply want a secure and nearby place to keep their money? Federal and state regulations are still in place that address this access issue, and numerous politicians are ready to champion them.