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In 1933 alone, about 4,000 commercial banks and 1,700 savings and loans institutions failed.

Kenneth H. Thomas

not all customers will benefit from greater consolidation

U.S. federal government rolled out various laws in 1784 to encourage multiple banks in individual states.

wave of consolidation occurred in 1994

"Many small banks feel that they are being pushed out of existence by new regulations,

swing of the pendulum last year, consolidation returned to 1994 levels. But in contrast to previous times, much of the consolidation has been due to failures

Loretta J. Mester

"In the short term, I think consolidation will pick up as weaker banks go through mergers and acquisitions, and stronger banks take time to get their capital shored up" in their pursuit of greater efficiency and economies of scale,

institutions that will likely be hardest hit by all this activity will be the community banks

have less than $1 billion of assets, but account for 92% of all banks and savings institutions,

Dodd-Frank Wall Street Reform and Consumer Protection Act was a death knell

experts expect consolidation to continue, and predict that the trend will leave the banking system better off in the long run. "We don't really need as many banks as we used to,"

Their plight hasn't been lost on the FDIC, which has launched various initiatives to give community banks some relief.

guidelines that lighten requirements for how these banks manage customers whose accounts are consistently overdrawn.

community banks play an important role in local economies. They typically have close relationships with individual customers

Todd A. Gormley,

"Smaller firms and local individuals trying to get loans from larger banks could be a subset of the population that is worse off because of consolidation,

concentration in geographic markets

are an important factor in the reciprocal relationship between lender and borrower

consolidation also leaves a handful of banks controlling the majority of certain types of products.

Four "mega banks" -- Wells Fargo, Bank of America, JPMorgan Chase and Citigroup -- now hold three-fifths of the home mortgage market, which limits consumers' choice of products and their ability to shop around for competitive pricing. "It's a textbook issue of a concentration of power," Guttentag says. "A limited number of firms control the market, and they will engage in implicit collusion."

borrowers with low incomes or bad credit are significantly less likely to default on loans if they borrow from a local bank than if they receive a loan from a distant bank or mortgage company.

some cities, states and regions have just one dominant bank.

Pittsburgh metropolitan area, PNC Bank has 47% of the deposit share, according to the FDIC. The second-largest bank in the area is Citizens Bank of Pennsylvania, which has 8.5% of the deposit share.

no limits on deposit shares in certain markets, 1994's Riegle-Neal Act imposes a 10% cap on nationwide deposits for a single bank.

Treasury Department is now looking into modifying the cap to include all consolidated liabilities.

consumers need not worry

Mester

While the total number of banks may be declining, the number of branches isn't.

In the last 10 years, the number of bank branches nationwide has increased 15%, although that expansion has primarily involved banks with $500 million or more in assets. The number of branches dropped slightly for the first time in a decade in 2010.

Guttentag

the number of banks will continue to shrink, but he doubts the U.S. will ever look like, say, Canada -- which has just 22 banks. Indeed, if consolidation continues as it has over the past 20 years at the average annual rate of 3.3%, it would take 60 years for the total number to fall below 1,000 banks and nearly 130 years to get below 100.

if the number of banks shrinks from 6,000 to 100, if those 100 are operating in all market segments and if consumers have many options, there is no reason for concern," Guttentag