Under Obama, New Bank Formation Has Dwindled to Nothing

While listening to the Jamie Dimon testimony before the Senate Banking, Housing and Urban Affairs Committee today, I was struck by a comment by one of the Senators.  He mentioned that he had heard, but hasn't verified, that in the last year no new bank charters were granted.  If true that is very damning.  We know that banks continue to shutter and if no new ones come on to take their place, that could explain some of our current malaise.  It looks like what that Senator had heard is true.  Here is what I got from the FDIC statistics:

So far in 2012, there has not been a single bank charter approved.  In 2011, only three were approved (the lowest number since at least 1936!) and even they weren't actually new banks.  Those were charters given to banks specifically created to buy failed banks.  If you add up the number of new bank charters over the entire Obama administration, all 3+ years, the total is 37.  The lowest number in any one year was 50.  That is just abysmal.  To put another way, there were more banks created in the late 1930's, in the 1970's recession, in the 1980's recession and in the wake of the Savings and Loan crisis than there are today.  Also, the total number of banks shrank by 11.6% since Obama took office.  Fewer banks mean fewer places to apply for a loan and therefore less chances you'll get any money at all.

Dodd-Frank and all those massive regulations that have been crammed down on banks is clearly a culprit.  As former FDIC Chairman Bill Isaac commented back in March on the new regulations:

The bigger banks can absorb it, the smaller banks can’t. I would not be surprised to see half of the community banks in this country go out of business if we don’t give some relief from Dodd-Frank for them...  I think that Dodd-Frank is a terrible piece of financial legislation.  It didn’t address any of the causes of the crisis that we just went through. It won’t prevent the next crisis. It’s heaped volumes and volumes of regulations.

As Jamie Dimon testified today, he currently has hundreds of regulators onsite at any one time at JP Morgan, but with all the changes, they aren't clear who is in charge of what or who has the authority to do anything.  And this is JP Morgan which has an army of lawyers guiding them through the regulatory jungle.  If he is lost, community banks have no hope.  No wonder there has been almost no new banks formed.