"[D]odd-Frank, a law intended to take on the systemic risk of 'too-big-to-fail' banks, is multiplying the problem. 'The big banks that are too big to fail are bigger now than ever, but the regulations have trickled down to the smaller banks that didn’t cause the financial crisis' Mr. Hill says. As a result, community banks are disappearing. 'When I started my first bank in the 1970s there were 24,000 banks in America,' he says. 'There are now 7,000 banks. It may soon be 500 or even fewer.' [...]A correspondent writes, "It's driven in part by politics and regulation and in part due to technological change and market competition. I say the latter only because different tech platforms are allowing traditional roles of banks to be decentralized across time and space (payment platforms, loan intermediation, escrowing, etc)."
He laments that the Community Reinvestment Act, a catalyst of the 2008 subprime mortgage crisis, still hasn’t been repealed. 'We are literally required to make loans that we know are going to fail.'"
Note that this is actually bullish for cheap small banks: those trading below the value they would receive in a merger, and especially those trading below book value.