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Lemonade or lemon?: Riegel-Neal and the consolidation of American banking

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  • Ann Matasar
  • Joseph Heiney

Abstract

Riegle-Neal altered the American banking landscape by eliminating the prohibitions against banking and branching, thus paving the way for banking mergers and interstate acquisitions across state lines. The law's proponents expected that it would lead to fewer but stronger banks more able to compete with domestic, nonbanking financial institutions and with foreign banks both at home and overseas. Detractors feared that fewer but larger banks would reduce services to individuals, small businesses, farmers, and small communities or increase the cost of these services. This paper finds that fears associated with Riegle-Neal have become mute because branching networks and de novo banks filled niches created or left vacant by large banks' expansionism. Copyright International Atlantic Economic Society 2000

Suggested Citation

  • Ann Matasar & Joseph Heiney, 2000. "Lemonade or lemon?: Riegel-Neal and the consolidation of American banking," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 6(2), pages 249-258, May.
    • Handle: RePEc:kap:iaecre:v:6:y:2000:i:2:p:249-258:10.1007/bf02296106
    DOI: 10.1007/BF02296106
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    References listed on IDEAS

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    1. Jayaratne, Jith & Strahan, Philip E, 1998. "Entry Restrictions, Industry Evolution, and Dynamic Efficiency: Evidence from Commercial Banking," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 239-273, April.
    2. Economides, Nicholas & Hubbard, R Glenn & Palia, Darius, 1996. "The Political Economy of Branching Restrictions and Deposit Insurance: A Model of Monopolistic Competition among Small and Large Banks," Journal of Law and Economics, University of Chicago Press, vol. 39(2), pages 667-704, October.
    3. Schranz, Mary S, 1993. "Takeovers Improve Firm Performance: Evidence from the Banking Industry," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 299-326, April.
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