The Financial Crisis Bank Mergers

The United States can be thrown into a classification of being intellectual, envious and also greedy. People around our nation always strive to be at the top of the specific activity they are attempting to achieve. Our banks have proved in order to be successful in the financial world today, you need to have a more attractive business plan than other banks in order to attract customers. When banks merge with each other, they add insight and experience from another viewpoint to their previous attributes. By having these different viewpoints scattered amongst the business structure, firms are open to new ideas and are able to find different markets to target. Bank merging has emerged as a necessity in order to compete with the opposition in today’s banking world, and firms continue to prove their success after making these acquisitions to form larger institutions with various financial services.

The idea behind merging two firms together or acquiring another firm originates from banks knowing that the world cannot be run by a huge allotment of banks. They have become aware that the industry that everyone has always known must be restructured into a small amount of large firms instead of a large amount of small firms (Rhoades 1). By having a larger firm, you have access to more clients and capital to gain more profit potential throughout the life of the firm. Back in the 1980’s banks started to understand this concept, and because of new laws, were able to start acquisitions of different banks across their own state lines (Rose 630). Many new opportunities were presented to different firms in terms of expanding within the United States. Then in 1994, Congress passed the Riegle-Neal Interstate Banking Act, which knocked the barriers down for firms to make different acquisitions in markets across the nation. The floodgates opened slightly and many acquisitions were soon on the way. From 1994 to 1996, the average asset size of acquired banks increased from $239 million to $635 million and the average asset size of acquired organizations increased from $7.8 billion to $32.8 billion (Rhoades 19). The increase in large firms takeovers in this specific time period was because of the major influence the act had on encouraging interstate expansion. Most mergers of the recent past have been considered acquisitions in which the larger firm absorbs the other institution and forms one big entity. The biggest complement to the financial industry was when Congress passed the Gramm-Leach-Bliley Act of 1999. This act opened the merging field to being able to acquire companies in the financial industry that were not in the same focus as their own, such as a securities firm acquiring a bank. By having more diversified services in a company, a company is able to maximize profits they have never discovered and are not limited to only focusing on a specific area of the financial world (Rose 630).

In 2007, Bank of New York and Mellon Financial Company