How many formerly famous banks have disappeared in only a generation! Of the 50 largest U.S. bank holding companies by assets in 1983, only eight still exist as independent companies. For those of us who have spent some time in the banking trade, reading the 1983 list is a sobering remembrance. Only 16% of these 50 once-prominent banks have survived; 84% have passed into memory.
It is hard to keep clearly in focus, as we think about business or investment strategy, how profound the change can be in a relatively short time. The bank trainee who was 23 years old at the time of our original list is now only 50--with perhaps another 15 or 20 years in the business to experience still more shifting of the foundations.
Our list displays the riskiness of banking and its pervasive consolidation over the last generation. Do we expect the risk or the consolidation to stop now? Or change direction in some surprising way? Note especially that the survivors are by no means the biggest institutions of 1983--only two of the top 10 and three of the top 20 made it to here.
The structures of the present to which we are accustomed seem so solid. But perusing this list should make us usefully reflect on the insubstantiality of institutions and get ourselves ready for more creative destruction, to use the celebrated term of Joseph Schumpeter.
As Schumpeter observed, "Economic progress, in capitalist society, means turmoil." And further: "Capitalism not only never is, but never can be, stationary."
We bid the "Memories" banks adieu and life goes on.
Pollock Bank Survival
Alex J. Pollock is a resident fellow at AEI.