"Financial Industry Megamergers and Policy Challenges".

Hoenig, Thomas M.

Economic Review, Third Quarter 1999, pp. 7-13.

The financial industry has experienced a series of megamergers throughout the late 1980s and early 1990s. Since the early 1980s, the number of banks in the United States has fallen from 12,000 to 7,000 today. These bank mergers raise new questions, such as "are they in the public interest?" and "are traditional regulatory tools adequate in a new banking environment?" Thus far, these megamergers have not sparked large resistance from federal regulators. This is because banks that move into new markets typically do so by merging with a bank that already serves the community it wants to target. Consequently, the concentration levels remain constant even after the merger takes effect. However, megamergers have the potential to create new policy problems if banks eventually become "too big to fail."...