As community bankers and their running dog lackeys run pell-mell into a new year, dodging bricks thrown by bank bashers from many quarters of the peanut gallery, it's always good for them to keep in mind that they may soon be able to petition the EPA to add them to the endangered species list, right next to the Cloud Forest Rice Rat and the Pygmy Hog Sucking Louse. Why would community bankers merit such favored status? I'm glad you asked.
Since the mid-1980s there has been a tremendous consolidation in the U.S. banking industry.
The number of banks fell from 19,017 in 1984 to 7,357 in 2011, according to the Federal Deposit Insurance Corp. And the percentage of assets held by community banks fell from 38 percent to 14 percent.
In other words, the big banks got bigger.
The FDIC pays lip service to apple pie, motherhood, and community banks, by noting that the little guys supply a majority of bank branches in rural counties (20% of all US counties have only community bank offices), and that community banks make 46% of all loans to small businesses and farms. Nevertheless, don't put any serious money down on a bet that the incredibly shrinking small bank base will cause the FDIC to reverse its "unofficial" moratorium on de novo bank charters or to make it any easier for private equity "players" to make a difference by buying and recapitalizing community banks. The likelihood of the FDIC having an epiphany, slapping its forehead, and crying out "We were wrong about there being too many banks in this country; let us now help the banking biz be fruitful and multiply by granting a boatload of new bank charters, easing our foot off the regulatory burden accelerator, and generally worrying less about the tensile strength of the coverings of our own buttocks and more about the survival of little guys," is akin to the likelihood of Charlie Sheen joining The Monastery of Christ in the Desert or of Lindsay Lohan not busting parole.
Look at it this way: if the trend continues, community banks may be able to halt big bank expansion by arguing that any new big bank initiative requires a "community banking environmental impact statement."