Between the early 1990s and 2009, 37 separate American banks and financial firms were folded, step by step, into just four giants: JPMorgan Chase, Bank of America, Citigroup and Wells Fargo. The chart below traces every one of those deals on a single timeline. Its own footnote credits Federal Reserve and U.S. Government Accountability Office (GAO) data, and it became one of the most shared images of the post-crisis years because it shows, at a glance, how the phrase "too big to fail" came to describe a handful of names.
Click the image to open the full-size version.
Chart shared via Exposing Truth; data credited on the chart to the Federal Reserve and the GAO.
How to read the chart
Each coloured band is one of today's four banking groups. Read from left to right: the names in the first column are the institutions as they stood in 1990–1995, and every point where two bands join is a merger or acquisition, placed in the year it happened. The name written on the joined band is the one that survived. By 2009 on the right-hand edge, only four names remain.
The bands are not drawn to scale. A small mortgage lender and a national bank take up the same width, so the chart shows lineage, not size. It also covers only the four winners' family trees; thousands of smaller banks merged or closed in the same years without appearing here.
The four family trees
Citigroup
The simplest tree. Travelers Group and Citicorp combined in 1998 to form Citigroup, which also absorbed European American Bank and Mexico's Banamex. The Citicorp–Travelers deal joined a commercial bank with an insurer, something the Depression-era Glass–Steagall rules and the Bank Holding Company Act did not allow. The Federal Reserve gave Citigroup a temporary waiver in September 1998, and the Gramm–Leach–Bliley Act, signed in November 1999, made such combinations permanently legal.
JPMorgan Chase
Chemical Banking merged with Chase Manhattan in the mid-1990s, and that bank joined J.P. Morgan in 2000. Bank One, itself built from Banc One, First Chicago and First Commerce, followed in 2004. Then came two crisis purchases in 2008: the investment bank Bear Stearns, bought at a fire-sale price, and Washington Mutual, which had swallowed Great Western, H.F. Ahmanson and Dime along the way.
Bank of America
NationsBank, BankAmerica, Security Pacific and Continental Bank came together in the 1990s under the Bank of America name. FleetBoston (Fleet, BankBoston, BayBanks, Summit and UJB) joined in 2004, followed by MBNA and U.S. Trust. In 2008 and early 2009 the bank took over the troubled mortgage giant Countrywide Financial and the investment bank Merrill Lynch.
Wells Fargo
Wells Fargo bought First Interstate in 1996 and merged with Norwest in 1998, keeping the Wells Fargo name. Its biggest step came at the end of 2008 when it acquired Wachovia, which was itself the product of First Union's 2001 merger with the old Wachovia plus SouthTrust, CoreStates, Central Fidelity and The Money Store.
Why so many mergers happened
Until the 1990s, U.S. law kept most banks inside state lines. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, signed by President Bill Clinton that September, allowed banks to operate and branch across states. Five years later, Gramm–Leach–Bliley removed the wall between commercial banking, investment banking and insurance. Together the two laws made national, all-purpose financial groups possible, and the chart's crowded middle years show banks racing to build them.
The overall numbers tell the same story. The count of U.S. commercial and savings banks fell from 14,495 in 1984 to 6,532 by the end of 2010, and the five largest banks went from holding about 30% of U.S. banking assets in 1998 to about 45% in 2008.
The 2008 crisis: the final mergers
The last branches on the right side of the chart were not ordinary business deals. They were rescues during the financial crisis. On 25 September 2008, regulators seized Washington Mutual, the sixth-largest U.S. bank, in what remains the largest bank failure in American history; JPMorgan Chase bought its banking operations for $1.9 billion. Days later, Wachovia suffered a run. The FDIC first arranged for Citigroup to buy it, but Wells Fargo made a better offer for the whole company, and the deal closed on 31 December 2008 after a legal fight with Citigroup.
In other words, the crisis did not break the giants apart. It made several of them bigger, because the quickest way to stop a failing bank from spreading panic was to have a stronger one absorb it.
What "too big to fail" means
The phrase was popularised by Congressman Stewart McKinney in a 1984 hearing about the rescue of Continental Illinois, then the seventh-largest U.S. bank by deposits. A bank is "too big to fail" when its size and links to the rest of the financial system are so large that letting it collapse could damage the whole economy, so governments step in to prevent it.
Critics point to three problems: moral hazard (a bank that expects rescue may take bigger risks), an uneven playing field for smaller banks, and danger to financial stability. After 2008, the Dodd–Frank Act of 2010 required banks to hold larger capital cushions and more easily sold assets and restricted some trading with their own money. Internationally, the Financial Stability Board now names "global systemically important banks" each year, and all four banks on this chart are on that list, which brings extra capital requirements.
What the chart does and does not prove
The chart is an excellent map of how concentration happened. It is not, on its own, evidence of wrongdoing, and it does not show that these banks escaped every consequence: they paid large settlements after the crisis, and Washington Mutual, Bear Stearns and Wachovia ceased to exist as independent firms. What it does show is that by 2009 a very large share of American banking ran through four companies, which is why debates about their size, regulation and possible break-up continue today.
Sources: Wikipedia: Too big to fail; Wikipedia: Gramm–Leach–Bliley Act; Wikipedia: Riegle-Neal Act of 1994; Wikipedia: Washington Mutual; Wikipedia: Wachovia; Upworthy (2014). Chart data: Federal Reserve and GAO, as credited on the image.
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