OK, another bank buyout: big numbers that rumble on Wall Street,
promises of efficiency and nationwide reach. But beyond the rhetoric
and investment buzz, another story emerges.
As Bank of America plans to take over Fleet Bank - the third
largest bank merger in United States history - there is renewed
concern with the gradual concentration of power and influence in the
To begin with, the buyout is mostly a nuisance for the thousands
of people who bank at Fleet. Many have already suffered through bank
changes in earlier mergers.
"There's no redeeming value for consumers whatsoever," says
consumer advocate Ralph Nader. He sees no new consumer services, no
reduction in bank fees - just more absentee ownership for New
Of course, you might expect him to say that. But experts point to
studies that demonstrate that bigger does not necessarily mean
better. Mid-size banks (between $1 billion and $10 billion in
assets) have a higher "efficiency ratio" than bigger or smaller
banks, according to data from SNL Financial in Charlottesville, Va.
That means they pay a smaller share in expenses to generate a dollar
"Smaller banks are able to compete very effectively with bigger
institutions," says Christopher James, a finance professor at the
University of Florida, Gainesville. That's so at least in areas of
most concern to ordinary consumers.
So if the deal isn't about efficiency, what's all the hoopla
Bank of America, by paying $43 billion (at time of the
announcement) to take over Fleet, will become a truly national bank.
That was not possible until passage of the Banking Act of 1999.
It will become the nation's second-largest bank (after
Citigroup). It will have branches in most states with a total 9.8
percent share of deposits in the US, according to SNL Financial. By
law, BofA cannot make another acquisition that would push its share
over 10 percent. It can, though, exceed that percentage by internal
Wall Street has been focused on the financial aspects of the
deal. Shareholders of Fleet Bank stand to do extremely well. They
will get BofA stock worth perhaps 30 percent or more than their
Fleet shares, depending on the value of BofA shares if the deal wins
approval of regulators and is completed.
As a result, the top executives and directors of Fleet, with
sizable holdings of their bank's stock, also stand to benefit
hugely. An analysis by the Boston Herald finds that FleetBoston
Financial Corp. …