While Wall Street has been utterly transformed by this financial crisis, US Main Street banking has not been. Yes, your local Fleet branch is now part of the same empire that owns Merrill Lynch, but it turned itself into a Bank of America some time ago, and nothing more is changing.
In the UK, however, we’re seeing the forced merger of two massive high-street giants, Lloyds TSB and HBOS. Both of them were pretty enormous to begin with, formed from mergers of their own: Lloyds Bank with the Trustee Savings Bank, and Halifax with the Bank of Scotland. They’re both so huge that in normal times this merger would face big anti-trust obstacles — but of course these are not normal times:
A deal generating such large market shares would normally contravene competition limits, but Mr Daniels said that consumers were well protected by UK regulations on market abuse.
In a statement, John Hutton, secretary of state for business and enterprise, said the public interest conditions normally applied only to media ownership and cases where national security was involved. He said that on the advice of the Treasury, the Bank of England and the Financial Services Authority, he would apply it in this case too.
The reason for the merger is cost savings and size: these are very mortgage-heavy institutions, in a country with a housing bubble which was bigger than the one in the US, and they face enormous potential losses. In such a situation, sheer enormity does help: just look at Citi or UBS, which are still very much going concerns despite losses much bigger than those at places like Lehman or Merrill.
Nothing like this is going to happen in the US. There are three US megabanks now — Citi, BofA, and JP Morgan Chase. It’s conceivable that one of them might end up merging with Wells Fargo, if the latter’s Californian mortgages end up exploding in its face; it’s not conceivable that any two of the three would ever be allowed to merge.
But it’s certainly a sign of how crazy these times are that the Lloyds-HBOS deal has gone through so easily.