A history of banking over the last 30 years

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October 30, 2018
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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 Federal Reserve Bank of St. Louis (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 return on equity of all U.S. banks—this number represents the amount of net income returned as a percentage of the bank's equity. Next, the federal funds rate (as well as average interest rates for a 30-year mortgage and 48-month car loan) 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.

ALSO: Looking back at 50 years of government spending


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’s earlier recession, the New York Stock Exchange crashes hard on Oct. 19, 1987—a day that will go down in U.S. history as “Black Monday.” Within one day, the NYSE drops 22.61%, and the Dow Jones plummets 508 points. The worldwide banking event leads to trading curbs (also known as “circuit breakers”) which will allow exchanges to pause trading in extraordinary cases of large price declines.



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 files for bankruptcy after entering FDIC receivership on March 11, becoming the largest FDIC-assisted bank failure in history. Real estate devaluation, as well as the collapse of Texas’s oil market, are among the reasons cited.



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 Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (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 Friday the 13th Mini-Crash (“Black Friday”) or the Junk Bond Crash. It’s thought to be a response in part to the collapse of a United Airlines buyout deal.



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 Aug. 2, Iraq invades Kuwait, triggering an ensuing war with the U.S. and a dramatic spike in worldwide oil prices. Meanwhile, the FDIC announces its first increase in insurance premiums in the history of the organization, bumping prices from 8.3 to 12 cents per $100 of deposits.



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 state grand jury indicts the Bank of Credit and Commerce International (B.C.C.I) in one of the largest examples of global bank fraud in history. 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 Medellín Cartel.



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’s economy. The storm, which caused roughly $30 billion in damage, led to 100% spikes in insurance rates and new building codes that increased the cost of a new home by $20,000. Conversely, stocks rose 10.8% over the 12 months following the storm. On Nov. 3, Bill Clinton is elected president.



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 predicting a broad market consolidation 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 Feb. 26 World Trade Center bombing never comes to fruition.



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 $290 billion in 1993 to more than $1.1 trillion by 2016). 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.



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 World Trade Organization (WTO) replaces the General Agreement on Tariffs and Trade (GATT), setting new rules for international trade. Later that year, AT&T divides itself into three different companies, leading to an 11% gain in stocks.



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 Resolution Trust Corporation (RTC), which was set up as part of the Savings and Loan bailout, sunsets its program 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.



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 economic crisis in Asia. 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.



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 Glass-Steagall Act, effectively lifting the separation of investment, insurance, and commercial banking. Meanwhile, Colombia, Ecuador, and Russia all grapple with their own financial crises.


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 Gramm–Leach–Bliley Act 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 later argue that the act paved the way for the 2008 financial crisis nearly a decade later.



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 dot-com bubble, 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 slapped with huge fines from the U.S. Securities and Exchange Commission for misleading investors.



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 hijack passenger airplanes 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—the longest trading shutdown since 1933. When the NYSE opens back up, the market drops 684 points, becoming the biggest loss in history 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 biggest insider trading scandals in history.



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 dropping again 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.



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 discount window to set rates above the federal funds rate. The new program also eliminates the requirement for banks to have exhausted other funds first and loosens restrictions on the purposes for which banks can use the primary credit.



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 net capital rule 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.



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 sink rapidly 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’s end, however, the New York Stock Exchange Composite Index has increased 7% from the year before, exceeding its bull market peak in March 2000.



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, Ben Bernanke 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 sells the last of his General Motors shares, reflecting waning faith in the auto industry.



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. files for bankruptcy, signaling the impending recession. On July 10, Standard and Poor's places 612 securities 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 collapse of two hedge funds which had invested in mortgage-backed securities. On Aug. 17, the Federal Reserve cuts its discount rate by a half-percentage point.



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 announces it has purchased Countrywide Financial, weeks before the Federal Reserve cuts short-term interest rates for the fifth time in four months. On Feb. 13, President George W. Bush signs the Economic Stimulus Act of 2008, granting a tax rebate to individuals in an effort to encourage business investment. On March 16, JPMorgan Chase buys Bear Stearns after the troubled brokerage firm collapses. On Sept. 7, the federal government takes control of Fannie Mae and Freddie Mac. Six days later, Bank of America announces it has bought Merrill Lynch as Lehman Brothers files bankruptcy. The following day, the Fed takes over insurance giant AIG in an $85 billion bailout. On Oct. 3, the Emergency Economic Stabilization Act bailout is signed into law. Two months later, with the Great Recession and global financial crisis in full swing, stockbroker Bernie Madoff is arrested on Dec. 11 in the largest financial fraud in U.S. history.



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 buying mortgage-backed securities insured by Fannie Mae, Freddie Mac, and Ginnie Mae, the Dow Jones industrial average hits a 12-year low. In January, President Barack Obama is sworn into office, and in February, he signs a $787 billion stimulus deal known as the American Recovery and Reinvestment Act into law. On April 15, Tea Party protests arise amid anger over the bailout of the banking and cars industries as well as potential cap and trade legislation. By October, the unemployment rate hits the highest in 26 years at 10.2%.



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 Dodd-Frank Wall Street Reform And Consumer Protection Act, establishing the Consumer Financial Protection Bureau (CFPB) and introducing significant changes to financial regulations. In November, the Federal Reserve announces a second round of government stimulus, dubbed QE2, buying $600 billion in long-term treasuries.



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 lowered the U.S.’s credit rating 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 Occupy Wall Street protests take place as participants voice outrage over what they say are Wall Street’s big money interests and their link to the Great Recession.



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 announces QE3, the government’s third and final round of qualitative easing in response to the recession. On Aug. 2, the Dow hits a new high at 15,658 points, suggesting that investor confidence has significantly returned.



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 soars to a new record high, 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 announces it will taper its assets-purchasing program by $10 million.



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, Janet Yellen replaces Ben Bernanke as the new head of the Federal Reserve. By year’s end, the S&P 500 Index is up 11.4%, 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%.



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 stock market selloff. By the following July, however, it has recovered and is hitting record highs.



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 Dow ending the year up 13.42% 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.


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 increases 25% 2017, inching toward 25,000 and marking the best stock year since 2013—a figure some experts attribute to President Trump’s business-friendly tax cuts. Meanwhile, the Federal Reserve raises interest rates three times throughout the year, signaling improved margins ahead for commercial banks.


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