The Yale Law Journal

February 2024

Banking and Antitrust

Banking LawAntitrust Law

abstract. Money is power. Banks have the extraordinary power to create the nation’s money and credit, which they are entrusted to channel into productive economic uses. Like most other forms of economic power, this publicly granted privilege can be abused for private gain. That is why the “money monopoly” and “money trusts” were once considered one of the most dangerous forms of concentrated private wealth, an existential threat to economic freedom and American democracy. Yet, for the past half-century, the law governing banks and the law curbing monopolies have occupied doctrinally and normatively separate spaces. Today, banking law is seen predominantly as an instrument of ensuring banks’ “safety and soundness,” which only minimally overlaps with competition-focused antitrust law.

This Essay offers a new understanding of banking law and its connection to antitrust. It argues that, contrary to the prevailing view, U.S. bank regulation operates as a comprehensive antimonopoly regime, designed to prevent excessive concentration of private power over the supply and allocation of money and credit in a democratic economy. The Essay shows how multiple provisions of banking law impose structural constraints on banks’ ability to abuse public subsidy and other government-granted powers and privileges. While often understood as serving purely prudential purposes, these statutes and regulations seek to protect America’s economy from potentially perilous competitive distortions and domination by concentrated financial interests.

Reframing the core narrative of U.S. banking law around the issue of economic power in a democratic society has far-reaching implications. Embracing the embedded antimonopoly spirit of bank regulation can fundamentally reset policymakers’ priorities and expand their options. It can generate more effective and comprehensive solutions to some of today’s most pressing public policy challenges, from the continuing growth of “too big to fail” banks to the rise of crypto and digital platform-based finance.

authors. Saule T. Omarova is Beth and Marc Goldberg Professor of Law, Cornell University. Graham S. Steele served as the Assistant Secretary for Financial Institutions at the U.S. Department of the Treasury from 2021 to 2024. Professional affiliations are provided for identification purposes only. The views and opinions expressed in this Essay are those of the authors and do not necessarily reflect the official policy or position of any agency of the U.S. government. For their thoughtful comments and criticisms, the authors would like to thank Dan Awrey, Felix B. Chang, Adam Feibelman, Anna Gelpern, Jamie Grischkan, Jeremy Kress, Patricia A. McCoy, Howard Shelanski, Sandeep Vaheesan, Spencer Weber Waller, Art E. Wilmarth, and participants in conferences and workshops at Yale University, Vanderbilt University, the Wharton School at the University of Pennsylvania, Arizona State University, and the University of California College of the Law, San Francisco. All errors are ours.


Antitrust is once again a hot area in U.S. law and politics.1 The rise of Amazon, Facebook, Google, and other giants forced it out of stuffy courtrooms and academic halls and into the public square.2 Technology platforms’ aggressive growth and seemingly unlimited ability to control our social and economic lives ignited a movement to revive antitrust as a tool of democratic politics.3 Paralleling American politics of the early twentieth century, antitrust is now the stuff of fiery campaign speeches, bestselling books, and intense doctrinal debates.4 In the wake of a pandemic that exposed deep inequality and structural weaknesses in the nation’s economy, it may also translate into substantive policy change. The Biden Administration has signaled its resolve to prioritize curbing the power of big businesses and restoring fair competition in key sectors of the U.S. economy.5 That caused not only Big Tech but Big Pharma, Big Agribusiness, and many other highly concentrated industries to brace themselves for the new era of antitrust enforcement.6

Except for Big Banks. America’s banking industry does not seem concerned about the antitrust turn in American politics. As the leading trade publication put it, President Biden’s actions pose a “minimal threat” to the ongoing consolidation in the banking sector.7 Wall Street clearly believes it is beyond the reach of new-generation trustbusters.

This is puzzling. Financial institutions are not immune from antitrust laws. Competition policy is part of federal bank regulation, administered by the specialized regulatory agenciesthe Board of Governors of the Federal Reserve System (Fed), the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC)in coordination with the Department of Justice (DOJ).8 It is also not the case that the U.S. financial industry is perfectly competitive. Banking is notoriously concentrated, with the ten largest commercial banks controlling about 55% of the U.S. banking assets,9 and the eight U.S. Global Systemically Important Banks (GSIBs) accounting for approximately 66% of the assets held by U.S. bank holding companies (BHCs).10 In fact, one of the most politically salient problems in financial policy is the existence of “too big to fail” (TBTF) banking conglomerates effectively shielded from market discipline.11

Yet, for the past half-century, antitrust has not been a prominent theme in U.S. banking law and regulation. Regulators have balanced the need to promote competition within the sector with the more prominent goal of preserving the stability of the banking system and solvency of individual institutions.12 To the extent that these goals are inherently in tension, competition concerns remain subordinate to banks’ “safety and soundness.”13 Even the TBTF problem, which clearly implicates antitrust-like concerns, is treated primarily as a matter of macroprudential regulationa set of regulatory objectives and tools aimed at protecting the stable functioning of the financial system.14 “Bigness” is not viewed as problematic, as long as big banks run their portfolios prudently under the watchful eye of their regulators and supervisors.15 Accordingly, the goal is not to keep individual banking firms from becoming too big but to keep them from becoming too risky.16

The government’s response to the financial crisis of 2008 reflected this logic. The bailout of Wall Street resulted in a smaller number of bigger banking institutions, and post-crisis regulatory reforms aimed to ensure that these reconstituted giants do not fail.17 Fifteen years later, the domino-like failures of Silvergate, Silicon Valley Bank (SVB), Signature Bank, and First Republic Bank put a new spin on the same problem. By exposing multiple regional banks’ vulnerabilities, this latest crisis refocused public attention on the need for good risk management and traditional prudential oversight.18 Massive deposit flight, expansion of deposit insurance to protect large depositors, and emergency sales of troubled banks further increased the size of large banking conglomerates and led to calls for liberalizing federal bank merger policy.19 Greater concentration and greater public subsidies once again became the price of banking sector stability.

The single-minded prioritization of safety and soundness makes bank regulation appear fundamentally different from antitrust law, which seeks to preserve fair competition and prevent monopolies. The two spheres are seen as doctrinally and normatively separate, with only a small area of overlap—primarily, bank merger review. Beyond this, antitrust currently has little impact on banks’ daily operations.

This Essay challenges that widely accepted view. It offers an alternative understanding of the relationship between the principles of antitrust and banking law. We argue that, on a deeper level, U.S. bank regulation is designed to operateand needs to be recognizedas a particular kind of sector-specific antitrust regime, rooted in the antimonopoly tradition in American law and policy.

In making this claim, we adopt a structural view of antitrust, which defines its core objectives in deliberately broad terms of preventing excessive concentration of private economic power. This view rests on a simple yet powerful notion that “antitrust policy doesn’t operate in a vacuum; it is interwoven with the fabric of the economy.”20 From this perspective, the overarching purpose of antitrust is not simply to maintain some technical measure of “competitiveness” in specific product markets, but to create durable structural foundations for the healthy growth of a democratic economy.21

Historically, the principal federal antitrust lawsthe Sherman Act, the Clayton Act, and the Federal Trade Commission Actwere a direct response to the growing threat corporate monopolies posed to American economic and political democracy.22 Through these statutes, Congress sought to safeguard competitive markets and to prevent excessive concentrations of private power that threatened the nation’s vitality and growth. Since the 1970s, however, U.S. antitrust jurisprudence has been myopically focused on consumer prices in specific product markets.23 Antitrust analysis and enforcement were reduced to technical application of microeconomic models, foreclosing broader political-economic concerns that animated the trustbusters and Progressives of the early twentieth century.24

It is those original understandings of antitrust, recently revived by the proponents of a progressive neo-Brandeisian movement, that underlie our project.25 This Essay reframes the core narrative of U.S. banking law as a multilayered system of structural constraints on private banks’ accumulation and abuse of economic power. It reveals the macrosystemic significance of federal bank regulation as a de facto antimonopoly regime that operates through a variety of mechanisms. Most of these mechanisms are routinely viewed solely as tools of prudential regulation and supervision. Their other role as structural means of preventing excessive concentration of corporate power over the supply and allocation of financial resources in a democratic economy is nearly entirely overlooked, in both academic discussions and policymaking.

We divide these mechanisms into three categories.

The first category includes three provisions of U.S. banking law that establish what is generally recognized as competition policy in banking: regulatory review of bank mergers and acquisitions, anti-tying rules, and prohibitions on management
26 This modality represents direct, or formal, application of antitrust to banking institutions and remains the overwhelming focus of the scholarly literature on antitrust and banking.27

The second category includes elements of banking law that, while not explicitly labeled as such, nevertheless function as antitrust tools. These include liability and loan concentration limits, rate regulations, and authority to break up large banking organizations. Each of these provisions has a parallel, though not necessarily identical, principle in competition policy. This modality thus represents functional replication of traditional antitrust in bank regulation.

The third and final category comprises the key elements of U.S. bank regulation without direct parallels in antitrust law: market entry controls, activity and affiliation restrictions, and regulation of inter-affiliate transactions.28 Typically framed in terms of bank safety and soundness, these provisions are unique to banking law. On the surface, they reflect an uneasy choice in favor of financial stability at the expense of market competition. Below the surface, these familiar provisions operate as unnatural monopoly regulation: they structurally constrain potential abuses of government-granted private power over the nation’s money and credit. This modality demonstrates the broader significance of prospective structural regulation as a potent antimonopoly tool. In this sense, it represents operational deepening of a structural approach to antitrust.

The government-granted monopoly on money creation is what ultimately explains the bank regulatory regime’s focus on maintaining the public/private balance of power. Banks are “special” entities to which the federal government outsources the sovereign task of creating, distributing, and managing the supply of U.S. dollars. Banks’ power comes from their uniquely privileged position as specially licensed and subsidized agents, or “franchisees,” of the sovereign public.29 In this arrangement, the government commits to accommodating and guaranteeing private banks’ liabilitiesthe bulk of the nation’s money supply—thereby shielding banks from the disciplining effects of market competition and potentially incentivizing them to engage in socially harmful risk-taking.

The task of bank regulation and supervision is to minimize the moral hazard built into this arrangement, maintain the stability of publicly subsidized franchisee banks, and prevent overissuanceof money in relation to the needs and productive capacity of the nation’s economy.30 “Safety and soundness” is an umbrella concept that captures these concerns in the most readily recognizable ways. It also operationalizes the overarching imperative of preserving the delicate balance of power in the public/private financial system. In that sense, prudential regulation channels the same fundamental concerns as those traditionally associated with the progressive, structural approaches to antitrust—preventing private institutions from abusing their entrenched competitive advantages. This Essay seeks to recover that deeply rooted commonality and highlight the importance of overcoming mechanical reliance on the narrowly defined notion of “safety and soundness.”

This Essay has potentially far-reaching implications. Reconsidering the aims of banking law to incorporate the forgotten goal of constraining excess corporate power expands the horizons of bank regulation and sharpens its focus. It reveals the multidimensional nature of competition concerns animating the existing regime of bank regulation by showing how some of its core elements—traditionally seen as limiting competition within the sector—are, in fact, designed to safeguard fair competition in the broader economy. Normatively, it shifts attention from the purely quantitative indicators of market concentration to the underlying substantive dynamics of concentrated private power over the vital public resource: the monetized full faith and credit of the United States. This more nuanced understanding, in turn, broadens the scope of policy choices and operational tools available to policymakers to include more structural, macrosystemic remedies.31

The analysis presented in this Essay, moreover, fills an important gap in the contemporary vision of structural antitrust. While some neo-Brandeisian scholarship engages with aspects of financial regulation,32 it has yet to advance a comprehensive account of the complex relationship between money, banking, and a democratic economy. A fuller appreciation of U.S. banking law as an antimonopoly regime is a critical component of a truly progressive economic policy agenda.

Rapid technological changes in finance and the broader economy make this reconceptualization exercise particularly timely.33 The entry of Big Tech companies into financial services, in particular, threatens to take the familiar TBTF problem to a qualitatively new level, reigniting the old debate on the “curse of bigness.” At the same time, upstart challengers in financial technology (fintech), cryptocurrency, and decentralized finance (DeFi) are reviving old arguments promoting the potential benefits to financial consumers from unfettered competition. The rhetoric of tech-driven “democratization” and “innovation,” however, often masks the old dynamics of concentrated control replaying themselves in a new environment. Behind the shiny surface of innovation, the balance of public and private powers in finance is under tremendous pressure.34

In this context, it is vital to rethink the synergies between antitrust law and financial regulation, which share the fundamental normative focus on preserving the structural integrity of, and curbing the excesses of concentrated private power in, U.S. markets. This shift in perspective will empower policymakers to take a more forward-looking and proactive approach to the ongoing transformation of finance. It will enable them to identify and address emerging systemic threats that do not fit neatly into the standard “safety-and-soundness” framework—threats that, left undisturbed, may grow into problems too big to solve through existing regulatory means.

Explicitly embracing the antitrust spirit of U.S. banking law underscores the fact that strong regulatory oversight of the financial sector is not inimical to market competition, just as deregulation is not inherently procompetitive. From the perspective of individual banking firms, regulatory compliance is a cost that can create a competitive disadvantage vis-à-vis unregulated rivals and cut into their profits.35 From a macrosystemic perspective, however, the regulations that generate these microlevel costs are often critical to the preservation of healthy market competition, not only in banking but also in the broader economy. Recognizing these dynamics is necessary in order to avoid privately beneficial but publicly harmful policy choices in the name of “promoting competition.” The rapid advance of fintech and crypto-finance makes it particularly important to resist misleading rhetoric and to strengthen, rather than weaken, regulatory protections against excessive growth and abuses of structural power in finance.

In this Essay, we do not claim to provide an exhaustive account of antitrust law or history, nor to offer a comprehensive critique of how modern antitrust doctrine is (or should be) applied in the banking context. Moreover, this Essay does not argue that every provision of U.S. banking law operates as an antitrust tool in disguiseonly that many do.36 Our goal is not to downplay the significance of prudential considerations in banking but to recover a lost motivation underlying many foundational provisions of banking law. By exposing the hidden antimonopoly roots of familiar banking principles, we seek to reconnect two strands of economic law and policy that recent popular conception holds as being only tangentially related. Much more remains to be written both about the complex interplay of antitrust and banking laws and about various competition-inspired elements of bank regulation. By advancing a new narrative of the field, this piece lays the foundation for a more productive and policy-relevant exploration of these issues.

The Essay proceeds as follows. Parts I and II outline the basic logic and common policy concerns underlying U.S. antitrust and banking laws. Part III discusses formal competition policy tools in banking. Moving beyond these familiar examples, Part IV analyzes regulatory provisions that channel traditional antitrust concepts in less direct, and sometimes even counterintuitive, ways. Part V examines well-known elements of banking law imposing structural constraints on private banks’ government-granted, or unnatural, monopoly powers. Finally, Part VI draws out key public policy implications of this reframing, with a focus on two salient challenges currently facing financial regulators: the TBTF problem and the rise of digital finance.