The Decline of Commercial Banks: A Shift in Financial Dominance

The financial landscape of New York, once dominated by six major commercial banks, has undergone significant changes. J.P. Morgan, the last of these banks to remain independent, is set to be acquired by Chase Manhattan, underscoring a trend of financial consolidation. This shift reflects not only strength but also weakness, as both institutions seek growth in areas where their previous efforts have been unsuccessful.

Key Takeaways:

• The commercial banks' dominance began to wane in the 1970s as corporations discovered they could save money by issuing securities rather than borrowing from banks.
• The stock market boom and series of loan debacles damaged commercial banks, hindering their recovery and allowing competitors to gain an advantage.
• Depression-era laws protecting banks from losses in securities made it difficult for them to move into other financial products.
• Investment banks, such as Morgan Stanley Dean Witter, have become dominant, thanks in part to the Glass-Steagall Act of 1933 separating commercial and investment banking.
• The trend of financial consolidation is driven by convergence, globalization, and technology, according to H. Rodgin Cohen, a partner in Sullivan & Cromwell.
• Chase and Morgan complement each other in various areas, with Chase strong in technology stocks and Morgan having a broader equity business.
• The largest New York-based bank in 1980, Citibank, is now part of Citigroup, formed through the merger of Citicorp and Travelers.
• Other banks, such as Bankers Trust and Continental Illinois, have also undergone significant changes, including takeovers and mergers.

Statistics:

• Market capitalization: Chase Manhattan ($66 billion), J.P. Morgan ($29 billion), Morgan Stanley Dean Witter ($121 billion)
• Number of major commercial banks in New York: 6 (circa 1980) vs. 1 (getCurrent)
• Years of bank dominance waning: approximately 20 (1980s-2000s)
• Percentage of financial institutions offering similar products: increased due to convergence
• Number of areas where Chase and Morgan complement each other: multiple

Sources:

• H. Rodgin Cohen, partner in Sullivan & Cromwell
• Ronald Mandle, analyst for Sanford C. Bernstein & Company
• American Banker (1980)
• New York Times
• Wall Street Journal
• Bloomberg News

Note: The sources listed above are extracted exactly as mentioned in the original text. If any sources were mentioned but not directly cited, please let me know and I'll add them accordingly.