Antitrust policy is ineffective because mergers cause banks to reduce rates paid on interest-bearing accounts, according to Katerina Simons and Joanna Stavins of the Federal Reserve Bank of New York.

After reviewing 499 mergers, the economists find the combined banks lowered deposit rates regardless of the amount of competition in the market.

They also find that big banks pay, on average, 4.1% less on certificates of deposit and 3.3% less on money market deposit accounts than small banks.

Other banks in the market also lowered rates after competitors merged, although some small banks temporarily raised rates to attract new customers, they write.

The researchers conclude that regulators should consider the impact on interest rates before approving any merger.

For a copy of "Has Antitrust Policy in Banking Become Obsolete?," call 617-973-3397 or visit


The recent wave of bank mergers may actually increase the amount of credit available to small businesses, according to Joe Peek of Boston College and Eric S. Rosengren of the Federal Reserve Bank of Boston.

Mergers among community banks produce larger institutions, which means they may make larger loans and still remain within government-set limits on loans to any single borrower. This has meant that companies are finding it easier to get between $100,000 and $1 million in credit.

At the same time, credit scoring is reducing the cost of underwriting loans under $100,000. These lower costs mean community banks are willing to remain in this market, even as they grow larger.

"Both trends are likely to result in the availability of more and lower- cost options to small business borrowers," they write.

For a copy of "The Evolution of Bank Lending to Small Business," call 617-973-3397 or visit


Surcharge fees are causing consumers to make fewer withdrawals from ATMs not affiliated with their bank, according to Federal Reserve Bank of New York economist James J. McAndrews.

The number of interchange transactions fell 10% last year, he finds. That contrasts with an 18.5% increase in ATM deployments in 1997.

"The decrease in interchange transactions suggests that consumers have changed their pattern of ATM usage," Mr. McAndrews writes. "To avoid surcharges, many consumers are likely visiting ATMs that are less convenient than those they had used previously."

Mr. McAndrews warns that this could change how banks compete. Instead of looking for the best rates, consumers may seek banks with the most ATMs, he writes.

For a copy of "ATM Surcharges," call 212-720-6134 or visit


The standard of living in the United States has improved dramatically in the past decade even though the cost of basic products has increased.

W. Michael Cox and Richard Alm of the Federal Reserve Bank of Dallas find that the number of hours a consumer must work to buy products has fallen significantly. For instance, it took 562 hours of work to afford a 12-inch color television in 1954 and 140 hours to buy a dishwasher. Today, a remote-controlled 25-inch set only costs 23 hours and a dishwasher costs 28 hours, they write.

For a copy of "Time Well Spent," visit

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.