How many formerly famous banks have disappeared in only a generation!  Of the 50 largest US bank holding companies by assets in 1983, only eight still exist as independent companies.  For those of us who have spent some time in the banking trade, reading the 1983 list is a sobering remembrance.  Only 16% of these 50 once prominent banks have survived; 84% have passed into memory (or oblivion).

The Top 50 Bank Holding Companies in 1983

A. Survivors

B. Memories

It is hard to keep clearly in focus, as we think about business or investment strategy, how profound the change can be in a relatively short time.  The bank trainee who was 23 years old at the time of our original list, is now only 50—with perhaps another 15 or 20 years in the business to experience still more shifting of the foundations.

Our list displays the riskiness of banking and its pervasive consolidation over the last generation.  Do we expect the risk or the consolidation to stop now?  Or change direction in some surprising way?  Note especially that the Survivors are by no means the biggest institutions of 1983—only two of the top ten and three of the top 20 made it to here.

The structures of the present to which we are accustomed seem so solid.  But perusing this list should make us usefully reflect on the insubstantiality of institutions and get ourselves ready for more creative destruction, to use the celebrated term of Joseph Schumpeter.  As Schumpeter observed, “Economic progress, in capitalist society, means turmoil.”  And further: “Capitalism not only never is, but never can be, stationary.”

Or to alter Shakespeare slightly:

          Since brass, nor stone, nor earth, nor boundless sea,

          But sad mortality o’ersways their power,

          How with this rage shall BANKING hold a plea?

We bid the “Memories” banks adieu and life goes on.

Alex J. Pollock is a resident fellow at the American Enterprise Institute in Washington, DC.  He was President and CEO of the Federal Home Loan Bank of Chicago 1991-2004.  In 1983, he was working at #8 Continental Illinois.