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Bank Mergers Lead to Greater Business Concentration

INTRODUCTION

bankThe recent merger between NationsBank and BankAmerica will create the USA's largest bank by the end of the year. This was the third merger in the banking industry within a week, and more are rumored to come. A merger occurs when one corporation buys the stock of another. The second firm goes out of existence as a separate corporate entity and all of its properties belong to the remaining firm. What consequences are in store for consumers? How do these mergers change the banking industry?

PROCESS

Read from the Federal Reserve's 1997 report to Congress on bank fees: Annual Report to the Congress on Retail Fees and Services of Depository Institutions --June 1997
Do the data show that multi state banks charge higher or lower fees to its customers?

Increases in business concentration may mean higher prices for the things people buy and reduce the amount of income available to buy other goods and services. Business concentration also has benefits. Can you list some?

1. Explain and illustrate ways in which large-scale business can be beneficial to the consumer.

2. Explain and illustrate ways in which large-scale business can harm the consumer.

3. Describe some of the problems sometimes created by concentration of business.

4. Why do expanding forms often combine with other firms?

Discuss these questions in light of what you've read:

  • It has been said that the average Americans of today accept big labor / big company price leadership, mergers, etc. as economic facts of life about which they can do very little. Do you agree?
     
  • Are monopolies and oligopolies a menace to our free enterprise system? Explain.