The absorption of First Republic Bank by JPMorgan Chase on May 1 was just the latest step in a relentless march of consolidation among U.S. banks, as America’s banking industry becomes both more concentrated and more closely entwined with the federal government.
Since the “Great Financial Crisis” of 2008, federal regulators have become comfortable with a banking industry led by a handful of mega-banks, with which agencies have an ever-closer working relationship.
The strategy of bank regulation has been to allow the banking industry to consolidate into an ever-smaller number of ever-larger institutions, which are then subject to tighter regulation, higher capital requirements and various stress tests. This theoretically makes the banking system more robust and less prone to financial crises….