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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 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

  • 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’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.


  • 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 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.


  • 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 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.


  • 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 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.


  • 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 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.


  • 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’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.


  • 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 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.


  • 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 $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.


  • 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 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.


  • 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 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.