Barry Riholtz samples a graph from the Wall Street Journal illustrating the history of Bank of America’s acquisitions since 1990 and how it came to be such a ponderous, failing giant.
From my perspective that history goes back a bit farther. More than 50 years ago I opened a passbook savings account and a checking account at Clayton Bank in Clayton, Missouri. My dad was the bank’s attorney and continued in that role until his death. Its top managers were frequent guests in our home and our entire family were on first name bases with them. Clayton Bank issued me an American Express Gold Card in 1976. I closed the savings account somewhat sadly several years ago but the checking account is still my primary personal checking account.
In the 1980s Clayton Bank was acquired by Boatmen’s Bank which was on a tear of bank acquisitions in Missouri at the time which lead to it becoming Missouri’s largest bank. A high school friend of mine was the son of one of the bank’s officers who, as it turned out, had gone to law school with my dad. They, too, were frequent guests in our home and we were on a first name basis.
Boatmen’s Bank was acquired by NationsBank in 1996, one of the acquisitions that lead to NationsBank, which had a substantial history of acquisitions of its own, becoming the South’s largest bank.
In 1998 Bank of America acquired NationsBank.
My wife had been doing her banking at LaSalle Bank. Bank of America’s acquisition of LaSalle in 2006 meant that for the first time in our married life we were doing our banking at the same bank.
It’s not clear to me who is being served by all of these acquisitions. Clearly, it is not the banks’ customers. Each acquisition has been an inconvenience and although most of these marriages are years in the past I still occasionally encounter some issues because my checking account was opened in Missouri, IMO bizarre for a bank with a national presence.
It’s not the banks’ shareholders. A quick check of share prices will confirm that for you. That these megabanks are, rather obviously, unmanageable suggests to me that the banks have not benefited organizationally by the acquisitions. I suspect that any possible increasing returns to scale were realized many acquisitions ago.
I can only discern one group that has obviously benefited: top management of a bank with total assets of $500 billion can garner higher compensation than top management of a bank with assets of $50 billion who can garner high compensation than top management of a bank with assets of $1 billion.
I’m sure my pals at the old Clayton Bank are long dead but I know for a fact that their income wasn’t measured in millions (or the equivalent 40 or 50 years ago).