A history of banking over the last 30 years
A history of banking over the last 30 years
In the past 30 years, commercial banking in the United States has gone through a roller coaster of highs and lows. The market saw sharp downturns amid the Savings And Loan Crisis of the late '80s to early '90s as well as the Great Recession of 2007 and 2008. Then there were great years like 1995 when stocks soared just before the dot-com bubble burst. There have been giant mergers, fraud scandals, government bailouts, stimulus packages, and even the establishment of several new regulatory institutions. All the while, commercial banking has pressed on.
This story compiles data about several aspects of the U.S. commercial banking industry in order to trace that industry over the past 30 years. Each slide breaks down five pieces of economic data, as reported by the (FRED) and the Federal Deposit Insurance Corporation (FDIC). The first two metrics include the total number of commercial banking institutions and its number of employees. The next figure is the average of all U.S. banks鈥攖his number represents the amount of net income returned as a percentage of the bank's equity. Next, the (as well as average interest rates for a and) which is the interest rate at which banks lend reserve balances to other financial institutions on an overnight basis. And finally, the total number of bank failures, according to the FDIC (note that the "total losses" value is in inflation-adjusted dollars).
Read on to learn more about the major banking events and other market milestones in recent history.
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1987
Total commercial banking institutions: 13,685 (45,498 branches; 59,203 offices)
Total employees: 1.54 million
Average return on equity: 1.49%
Federal funds rate: 6.77% (Avg. 30-year mortgage rate: 10.61%; Avg. 48-month car loan rate: 10.86%)
Failed banks: 217 (Total losses: $1.9 billion)
After a rapid recovery in the mid-'80s from the decade鈥檚 earlier recession, the New York Stock Exchange crashes hard on Oct. 19, 1987鈥攁 day that will go down in U.S. history as 鈥淏lack Monday.鈥 Within one day, the NYSE . The worldwide banking event leads to (also known as 鈥渃ircuit breakers鈥) which will allow exchanges to pause trading in extraordinary cases of large price declines.
1988
Total commercial banking institutions: 13,105 (46,478 branches; 59,597 offices)
Total employees: 1.52 million
Average return on equity: 13.35%
Federal funds rate: 8.76% (Avg. 30-year mortgage rate: 10.77%; Avg. 48-month car loan rate: 11.22%)
Failed banks: 232 (Total losses: $5.4 billion)
Amid the nationwide Savings and Loan Crisis, Texas-based First Republic Bank Corporation after entering FDIC receivership on March 11, becoming the . Real estate devaluation, as well as the collapse of Texas鈥檚 oil market, are among the reasons cited.
1989
Total commercial banking institutions: 12,691 (48,099 branches; 60,796 offices)
Total employees: 1.52 million
Average return on equity: 7.73%
Federal funds rate: 8.45% (Avg. 30-year mortgage rate: 9.78%; Avg. 48-month car loan rate: 11.94%)
Failed banks: 530 (Total losses: $53.4 billion)
On Aug. 9, President George Bush Sr. signs the congressionally approved (FIRREA) in an effort to mitigate the Savings and Loan Crisis. A few months later, the stock market sees another drop on Oct. 13, dubbed the (鈥淏lack Friday鈥) or the Junk Bond Crash. It鈥檚 thought to be a response in part to the collapse of a United Airlines buyout deal.
1990
Total commercial banking institutions: 12,325 (50,491 branches; 62,820 offices)
Total employees: 1.51 million
Average return on equity: 7.28%
Federal fundsdrate: 7.31% (Avg. 30-year mortgage rate: 9.68%; Avg. 48-month car loan rate: 11.62%)
Failed banks: 380 (Total losses: $18.6 billion)
On , triggering an ensuing war with the U.S. and a dramatic spike in worldwide oil prices. Meanwhile, the FDIC announces its in the history of the organization, bumping prices from 8.3 to 12 cents per $100 of deposits.
1991
Total commercial banking institutions: 11,904 (51,980 branches; 63,889 offices)
Total employees: 1.48 million
Average return on equity: 8.01%
Federal funds rate: 4.43% (Avg. 30-year mortgage rate: 8.35%; Avg. 48-month car loan rate: 10.61%)
Failed banks: 268 (Total losses: $15.2 billion)
On July 29, a the in one of the . Among other crimes, the financial institution is accused of bribery, fraud, and money laundering, working with heads of state like Saddam Hussein and Manuel Noriega, as well as criminal rings like the Medell铆n Cartel.
1992
Total commercial banking institutions: 11,446 (51,662 branches; 63,112 offices)
Total employees: 1.47 million
Average return on equity: 13.25%
Federal funds rate: 2.92% (Avg. 30-year mortgage rate: 8.14%; Avg. 48-month car loan rate: 8.6%)
Failed banks: 178 (Total losses: $7.0 billion)
On Aug. 24, Hurricane Andrew slams Miami with 145-mile-per-hour winds, decimating the insurance and housing markets, and leaving a permanent mark on southern Florida鈥檚 economy. The storm, which caused roughly and new building codes that increased the cost of a new home by $20,000. Conversely, stocks over the 12 months following the storm. On Nov. 3, Bill Clinton is .
1993
Total commercial banking institutions: 10,943 (52,559 branches; 63,504 offices)
Total employees: 1.48 million
Average return on equity: 15.63%
Federal funds rate: 2.96% (Avg. 30-year mortgage rate: 7.13%; Avg. 48-month car loan rate: 7.63%)
Failed banks: 50 (Total losses: $900.2 million)
Although analysts have been due to rising gold prices and concern the Federal Reserve will push interest rates higher, the Dow closes the year at nearly an all-time high, increasing 13.7% for the year. The banking industry rakes in record profits of $43.1 billion and worries over the impact of the never comes to fruition.
1994
Total commercial banking institutions: 10,431 (54,597 branches; 65,029 offices)
Total employees: 1.48 million
Average return on equity: 14.91%
Federal funds rate: 5.45% (Avg. 30-year mortgage rate: 9.18%; Avg. 48-month car loan rate: 8.75%)
Failed banks: 15 (Total losses: $190.5 million)
On Jan. 1, the North American Free Trade Agreement (NAFTA) goes into effect between the U.S., Canada, and Mexico, triggering a boost in trade among participating nations that will last two decades (going from ). The treaty will also increase investments across borders, bumping U.S. foreign direct investment (FDI) stock in Mexico from $15 billion to more than $100 billion during that same timeframe.
1995
Total commercial banking institutions: 9,920 (56,373 branches; 66,295 offices)
Total employees: 1.47 million
Average return on equity: 14.99%
Federal funds rate: 5.6% (Avg. 30-year mortgage rate: 7.11%; Avg. 48-month car loan rate: 9.36%)
Failed banks: 8 (Total losses: $112.7 million)
On Jan. 1, the replaces the General Agreement on Tariffs and Trade (GATT), setting new rules for international trade. Later that year, into three different companies, leading to an 11% gain in stocks.
1996
Total commercial banking institutions: 9,508 (57,833 branches; 67,343 offices)
Total employees: 1.48 million
Average return on equity: 15.27%
Federal funds rate: 5.29% (Avg. 30-year mortgage rate: 7.64%; Avg. 48-month car loan rate: 9.03%)
Failed banks: 6 (Total losses: $60.6 million)
The ), which was set up as part of the Savings and Loan bailout, and becomes part of the FDIC. During its six and a half years of operation, the corporation had liquidated mortgage loans and other real estate-related assets for 747 banks containing $403 billion in assets, costing taxpayers $160 billion.
1997
Total commercial banking institutions: 9,124 (60,401 branches; 69,526 offices)
Total employees: 1.52 million
Average return on equity: 15.65%
Federal funds rate: 5.5% (Avg. 30-year mortgage rate: 6.99%; Avg. 48-month car loan rate: 8.96%)
Failed banks: 1 (Total losses: $5 million)
On Oct. 27, the Dow plummets 554 points as concerns grow over the spiraling . The New York Stock Exchange pauses trading temporarily, and consumer spending sees a dip. The drop is the biggest point loss to date at that point in history.
1998
Total commercial banking institutions: 8,756 (62,079 branches; 70,838 offices)
Total employees: 1.61 million
Average return on equity: 14.49%
Federal funds rate: 4.68% (Avg. 30-year mortgage rate: 6.83%; Avg. 48-month car loan rate: 8.62%)
Failed banks: 3 (Total losses: $223.1 million)
On April 6, Citicorp and Travelers Group merge to become Citigroup, making the new conglomeration the biggest consumer banking institution in the world. The megamerger leads to legislation the following year that guts the , effectively of investment, insurance, and commercial banking. Meanwhile, , , and all grapple with their own financial crises.
1999
Total commercial banking institutions: 8,562 (63,739 branches; 72,303 offices)
Total employees: 1.64 million
Average return on equity: 16.03%
Federal funds rate: 5.3% (Avg. 30-year mortgage rate: 8.06%; Avg. 48-month car loan rate: 8.67%)
Failed banks: 8 (Total losses: $590.9 million)
Congress enacts the on Nov. 12 which repeals pieces of legislation that had previously prevented the combination of insurance, investment, and banking under one business roof. Some politicians and economists will that the act paved the way for the 2008 financial crisis nearly a decade later.
2000
Total commercial banking institutions: 8,297 (64,300 branches; 72,597 offices)
Total employees: 1.66 million
Average return on equity: 14.36%
Federal funds rate: 6.4% (Avg. 30-year mortgage rate: 7.13%; Avg. 48-month car loan rate: 9.64%)
Failed banks: 7 (Total losses: $32.5 million)
The , which has seen skyrocketing stock prices and the overvaluation of tech-based startups for half a decade, bursts on March 10, leading to the folding of large numbers of internet companies. In the fallout, a number of tech executives are convicted of fraud for misusing shareholders' money while major investment firms including Citigroup and Merrill Lynch are from the U.S. Securities and Exchange Commission for misleading investors.
2001
Total commercial banking institutions: 8,062 (65,061 branches; 73,125 offices)
Total employees: 1.69 million
Average return on equity: 13.72%
Federal funds rate: 1.82% (Avg. 30-year mortgage rate: 7.16%; Avg. 48-month car loan rate: 7.86%)
Failed banks: 4 (Total losses: $292.5 million)
On Sept. 11, terrorists and crash them into the World Trade Center and the Pentagon, prompting the New York Stock Exchange and the Nasdaq to stay closed for six days鈥攖he longest trading shutdown since 1933. When the NYSE opens back up, the market for one trading day. By the end of the week, the Dow plummets nearly 1,370 points (more than 14%), and the Standard and Poor's (S&P) goes down 11.6%. During those five days of trading, analysts estimate $1.4 trillion in value losses. The following month, the Enron Corporation is implicated in a separate event that will become one of the .
2002
Total commercial banking institutions: 7,870 (66,330 branches; 74,200 offices)
Total employees: 1.73 million
Average return on equity: 14.66%
Federal funds rate: 1.24% (Avg. 30-year mortgage rate: 5.93%; Avg. 48-month car loan rate: 7.34%)
Failed banks: 11 (Total losses: $415.3 million)
Although the stock market had recalibrated after a brief slide following the Sept. 11 attacks, it begins in March, and by September, it sees huge declines on par with 1997 and 1998. The U.S. dollar loses value too, at one point reaching an unprecedented 1-to-1 valuation with the euro. The Enron scandal and 9/11 are both cited as contributing factors to the downturn.
2003
Total commercial banking institutions: 7,750 (67,644 branches; 75,394 offices)
Total employees: 1.74 million
Average return on equity: 15.38%
Federal funds rate: 0.98% (Avg. 30-year mortgage rate: 5.85%; Avg. 48-month car loan rate: 6.82%)
Failed banks: 3 (Total losses: $62.6 million)
On Jan. 9, the Federal Reserve modifies its . The new program also for banks to have exhausted other funds first and loosens restrictions on the purposes for which banks can use the primary credit.
2004
Total commercial banking institutions: 7,612 (70,349 branches; 77,961 offices)
Total employees: 1.8 million
Average return on equity: 14.21%
Federal funds rate: 2.16% (Avg. 30-year mortgage rate: 5.81%; Avg. 48-month car loan rate: 6.71%)
Failed banks: 4 (Total losses: $3.9 million)
The SEC loosens its which requires a 12-to-1 leverage of debt to equity. The change allows firms with more than $5 billion in assets to leverage themselves an unlimited number of times, leading mega-firms like Bear Stearns, Lehman Brothers, Merrill Lynch, Goldman Sachs, and Morgan Stanley to use up to 30 times leverage on investments.
2005
Total commercial banking institutions: 7,507 (72,970 branches; 80,477 offices)
Total employees: 1.85 million
Average return on equity: 13.21%
Federal funds rate: 4.16% (Avg. 30-year mortgage rate: 6.22%; Avg. 48-month car loan rate: 7.43%)
Failed banks: 0 (Total losses: $0)
On April 15, stocks after IBM publishes a low-earnings report, seeing the Dow plunge 191.4 points, marking the biggest one-day drop in almost two years. By year鈥檚 end, however, the New York Stock Exchange Composite Index has from the year before, exceeding its .
2006
Total commercial banking institutions: 7,380 (76,034 branches; 83,414 offices)
Total employees: 1.93 million
Average return on equity: 13.41%
Federal funds rate: 5.24% (Avg. 30-year mortgage rate: 6.18%; Avg. 48-month car loan rate: 7.92%)
Failed banks: 0 (Total losses: $0)
On Feb. 1, becomes chairman of the Federal Reserve Board, beginning a 14-year term that will see him manage the board's response to the Great Recession. In December, U.S. billionaire Kirk Kerkorian , reflecting waning faith in the auto industry.
2007
Total commercial banking institutions: 7,262 (78,612 branches; 85,874 offices)
Total employees: 1.94 million
Average return on equity: 9.35%
Federal funds rate: 4.24% (Avg. 30-year mortgage rate: 6.17%; Avg. 48-month car loan rate: 7.59%)
Failed banks: 3 (Total losses: $161.9 million)
On April 2, key subprime mortgage lender New Century Financial Corp. , signaling the impending recession. On , Standard and Poor's linked to subprime mortgages on a credit watch, saying it anticipates others will soon be downgraded due to high foreclosure rates. Meanwhile, Bear Stearns sees the which had invested in mortgage-backed securities. On Aug. 17, the Federal Reserve by a half-percentage point.
2008
Total commercial banking institutions: 7,060 (82,438 branches; 89,499 offices)
Total employees: 1.93 million
Average return on equity: 1.62%
Federal funds rate: 0.16% (Avg. 30-year mortgage rate: 5.1%; Avg. 48-month car loan rate: 7.06%)
Failed banks: 25 (Total losses: $18.2 billion)
On Jan. 11, Bank of America Countrywide Financial, weeks before the Federal Reserve for the fifth time in four months. On Feb. 13, signs the , granting a tax rebate to individuals in an effort to encourage business investment. On March 16, JPMorgan Chase after the troubled brokerage firm collapses. On Sept. 7, the federal government . Six days later, Bank of America Merrill Lynch as Lehman Brothers files bankruptcy. The following day, the Fed in an $85 billion bailout. On Oct. 3, the bailout is signed into law. Two months later, with the Great Recession and global financial crisis in full swing, stockbroker is on Dec. 11 in the .
2009
Total commercial banking institutions: 6,813 (82,553 branches; 89,366 offices)
Total employees: 1.88 million
Average return on equity: -1.03%
Federal funds rate: 0.12% (Avg. 30-year mortgage rate: 5.14%; Avg. 48-month car loan rate: 6.55%)
Failed banks: 140 (Total losses: $27 billion)
As the government continues insured by Fannie Mae, Freddie Mac, and Ginnie Mae, the Dow Jones industrial average . In January, President Barack Obama is sworn into office, and in February, he signs a known as the into law. On April 15, arise amid of the banking and cars industries as well as potential cap and trade legislation. By October, the unemployment rate at 10.2%.
2010
Total commercial banking institutions: 6,506 (82,096 branches; 88,602 offices)
Total employees: 1.91 million
Average return on equity: 5.79%
Federal funds rate: 0.18% (Avg. 30-year mortgage rate: 4.86%; Avg. 48-month car loan rate: 5.87%)
Failed banks: 154 (Total losses: $12.5 billion)
As the economy begins its slow recovery from the Great Recession, Congress passes the , establishing the and introducing significant changes to financial regulations. In November, the Federal Reserve announces a second round of government stimulus, dubbed , buying .
2011
Total commercial banking institutions: 6,263 (82,680 branches; 88,943 offices)
Total employees: 1.94 million
Average return on equity: 7.91%
Federal funds rate: 0.07% (Avg. 30-year mortgage rate: 3.95%; Avg. 48-month car loan rate: 5.4%)
Failed banks: 92 (Total losses: $6.6 billion)
In March, unemployment dips below 9%, signaling some degree of economic recovery, yet later in the year, Standard & Poor's announces it has for the first time in history. Between May and October, the S&P 500 Index undergoes a brief bear market, seeing a decline of 21.58%, but later rebounds, closing out the year flat. The first protests take place as participants over what they say are Wall Street's big money interests and their link to the Great Recession.
2012
Total commercial banking institutions: 6,061 (83,071 branches; 89,132 offices)
Total employees: 1.95 million
Average return on equity: 8.78%
Federal funds rate: 0.16% (Avg. 30-year mortgage rate: 3.35%; Avg. 48-month car loan rate: 4.82%)
Failed banks: 51 (Total losses: $2.5 billion)
The Federal Reserve , the government鈥檚 third and final round of qualitative easing in response to the recession. On Aug. 2, the Dow at 15,658 points, suggesting that investor confidence has significantly returned.
2013
Total commercial banking institutions: 5,836 (82,266 branches; 88,102 offices)
Total employees: 1.91 million
Average return on equity: 9.46%
Federal funds rate: 0.09% (Avg. 30-year mortgage rate: 4.48%; Avg. 48-month car loan rate: 4.42%)
Failed banks: 24 (Total losses: $1.2 billion)
In March, the Dow Jones , increasing more than 125 points to 14,253.77 and surpassing its previous record prior to the recession in October 2007. In December, the Federal Reserve its assets-purchasing program by $10 million.
2014
Total commercial banking institutions: 5,596 (81,544 branches; 87,140 offices)
Total employees: 1.9 million
Average return on equity: 8.89%
Federal funds rate: 0.12% (Avg. 30-year mortgage rate: 3.87%; Avg. 48-month car loan rate: 4.06%)
Failed banks: 18 (Total losses: $392.2 million)
On Feb. 3, replaces Ben Bernanke as the new head of the Federal Reserve. By year鈥檚 end, the , marking the third year in a row of double-digit increases. Meanwhile, the Dow closes out the year up 7.5%, and the Nasdaq is up 13.4%.
2015
Total commercial banking institutions: 5,328 (81,119 branches; 86,449 offices)
Total employees: 1.89 million
Average return on equity: 9.2%
Federal funds rate: 0.24% (Avg. 30-year mortgage rate: 4.01%; Avg. 48-month car loan rate: 4%)
Failed banks: 7 (Total losses: $161.8 million)
In August, the Dow drops 1,300 points in a three-day period, kicking off a global decline in stock values and triggering a worldwide . By the following July, however, it has recovered and is hitting record highs.
2016
Total commercial banking institutions: 5,102 (79,696 branches; 84,798 offices)
Total employees: 1.91 million
Average return on equity: 9.03%
Federal funds rate: 0.54% (Avg. 30-year mortgage rate: 4.32%; Avg. 48-month car loan rate: 4.45%)
Failed banks: 5 (Total losses: $47.1 million)
Gains continue in 2016 with the and the Nasdaq up 7.5%. Analysts predict further increases in the coming year due to proposals by President-elect Donald Trump indicating the incoming Trump administration may reduce financial regulations.
2017
Total commercial banking institutions: 4,909 (78,774 branches; 83,683 offices)
Total employees: 1.94 million
Average return on equity: 8.37%
Federal funds rate: 1.3% (Avg. 30-year mortgage rate: 3.99%; Avg. 48-month car loan rate: 4.81%)
Failed banks: 8 (Total losses: $1.1 billion)
The Dow , inching toward 25,000 and marking the best stock year since 2013鈥攁 figure some experts attribute to President Trump鈥檚 business-friendly tax cuts. Meanwhile, the Federal Reserve throughout the year, signaling improved margins ahead for commercial banks.
