Felix Salmon

Treasury-captured-by-banks datapoint of the day

By Felix Salmon
November 30, 2009

Ryan Grim gets a great quote out of Treasury today, trying to explain why they’re pushing to allow banks to open branches in any state they like, despite the opposition of small banks, individual states, and Barney Frank:

“This eliminates a difference between thrifts and banks. While banks are subject to these limits, thrifts are not,” said Treasury spokeswoman Meg Reilly. “Although we are proposing to eliminate the thrift charter, this is an important step towards increased competition in banking and will reduce costs for consumers.”

One might think that eliminating the thrift charter would probably in and of itself do all that needs to be done in terms of eliminating the difference between thrifts and banks. But obviously not at Treasury. Instead, they seem to believe that allowing big banks in where they have previously been disallowed “will reduce costs for consumers”.

But big banks — and big thrifts — have been expanding across state lines for many years now. Is there any empirical evidence whatsoever that when that happens, costs for consumers go down? ‘Cos looking at the amount of money that banks are making in fee income, I’d doubt it.

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I look at it the other way. Why on earth would banks NOT be able to open branches in any State? Utterly illogical, it’s one country ‘innit? I don’t see what costs have to do with it. Does anyone really think that in, say the UK, banks in Cornwall should not be allowed to open branches in Sussex just because some bureaucrat says so? There are more cozy cartels and less competition where states and antiquated guilds restrict competition. Take real estate (broker licensing), insurance, and yes, banking.

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