Steve Eisman Warns of US Banking Cartel Risk as JPMorgan's Deposit Share Nears 14%

Legendary investor Steve Eisman has expressed concerns about the potential formation of a banking cartel in the United States, cautioning that a few major banks could dominate the market and increase the cost of financial services. Eisman, renowned for his successful bet against the housing market during the 2008 financial crisis, noted the absence of mergers and acquisitions (M&A) in the banking sector since the 1990s. He attributed this to regulatory discouragement following the Dodd-Frank Act, which has resulted in minimal M&A activity.

Eisman highlighted that JPMorgan's share of deposits in the United States has nearly doubled from 7% in 2007 to close to 14% today. He identified two main reasons for this shift: the high cost of regulation, which larger banks can more easily bear, and the escalating cost of technology, which requires significant scale to manage. Eisman warned that without a wave of M&A, a few very large banks and some community banks will dominate the market, leaving regional banks to struggle.

Eisman suggested that financial institutions like US Bank and Comerica should consider merging to better compete with the giant firms. He expressed concern that the current trajectory could lead to a situation similar to Canada, where a few dominant banks operate as a cartel, charging customers higher fees. Eisman's warnings underscore the need for policy changes to foster a more competitive banking landscape and prevent the concentration of market power in the hands of a few large institutions.