No new U.S. banks in 2011

That’s the jaw-dropping news on how hard the brakes have been put on financial innovation amongst the aspiring bourgeois:

There were no new banks created in the US in 2011, making it the first year in decades that the country has gone without the establishment of a single start-up lender.

The lack of new or de novo banks underscores the rapidly shifting business environment for US financials and changed attitudes towards the industry after the recent crisis.

[…] “The number of de novos has been trending down for a few years. There’s a pipeline effect – somewhere between one or two years,” said one analyst. “The lack of de novos now is probably a reflection of public attitudes in 2008.” Other analysts say the still-challenging operating environment for US financials is deterring banking start-ups.

I decided to looking into the process of opening a bank, and ran into a lovely website so conveniently set up by the Federal Reserve. For some reason it is geared towards “Minority-Owned and De Novo Institutions.” I felt a bit insulted at the minority thing, since I would call my fictional bank The 99%.

Anyways, here’s the relevant part of bank startup requirements, a 6% up front take of your business by the Federal Reserve (a private corporation, not a government institution subject to public inquiry).

Required Stock Subscription for Member Banks

As a condition of membership in the Federal Reserve, member banks (both state- and OCC-chartered) are required to subscribe to stock in their District’s Federal Reserve Bank. The required subscription is equal to 6 percent of the bank’s capital and surplus; 3 percent must be paid in, and the remaining 3 percent is subject to call by the Board of Governors of the Federal Reserve.

Holding stock in a Federal Reserve Bank does not carry with it the typical control and financial interest conveyed to holders of common stock in for-profit organizations. The stock may not be sold or pledged as collateral for loans; it is merely a legal obligation required with membership. Annually, member banks will receive a 6 percent dividend on their stock, as specified by law, and they can vote for some of the directors (class A and class B directors) of their Reserve Bank.

Well shit, suddenly we need to rename the bank The 94%. I humbly suggest Occupy Wall Street check on their math, too.

That’s in addition to the thousands of regulations and associated fees on U.S. banks by government policymakers. Something that clearly isn’t all that difficult of a business to avoid if you are a big bank and can ratchet your percentage back to 99%, since you also have thousands of lawyers at your beck and call.

I do want to end with a question for any branch managers of global banking behemoths reading this:

Could you run your own bank?

I’m guessing the typical answer is an easy yes, but with the game stacked against start-ups by plutocrats from the word go, apparently few (none) have the balls to find out.

1 Comment
  1. Let me suggest that this might actually be a good time to be starting a bank.  Unlike your older competitors, you do not own any trash NINJA mortgages, cDOS, CDSs, ARMs, …  People expect very low rates on their savings and checking accounts.  Emulating M&T Bank, which also avoided the credit card debacle ‘we do not issue credit cards’, might be sound.