Out of Adversity: Diversity? Lifting the Plague of Bank Branches

One of the caustic urban side effects of the last decade's irrational exuberance was the way competition among superbanks, clamoring to stake out a national presence, created an explosion of new branches that descended onto the retail streets of America's cities like locusts.

The upside was that this was usually accompanied either with new construction or the major rehabbing of the buildings in which the branches were placed. The downside was the way financial institutions threw money around like drunken sailors early 21st century bankers, driving out long-term local businesses unable to match the elevated rents the banks were willing to pay. Retail Traffic has reported that at their peak, banks were paying 30 to 40% over the going retail rental rates. It was not uncommon to find bank branches taking over two or more corners of a busy intersection; not unheard of to find them on all four.

If you walked into many of the branches, you would find a minimum of activity taking up a maximum of space. The branches seemed to function less as functioning offices than as giant billboards whose signage was designed to suck in deposits and insinuate the brand's name into the eyeballs of as many people, in as many places, as possible.

It was a throwback to the dot.com bubble, when company after company (remember pets.com?) convinced gullible analysts that their ever increasing losses were a promising byproduct of increasing market share. With few exceptions, however, when investors reached into the supposed pot 'o gold at the end of that rainbow, they found themselves clutching only I.O.U.s and a tarring grime of debt that wouldn't wash off.

You can't see it on their polished facades, but that same tar now smothers the branches of all those failed banks. Crain's Chicago Business is reporting on Monday that JP Morgan Chase is closing 57 branches of Washington Mutual, the no-fees, no questions, no liquidity bank that was careening towards collapse until Chase acquired it. And WaMu, which had already closed 25 Chicago branches in 2008, still has 60 branches left. Imagine: 120 storefronts gone empty in a space of a couple months.

As late as 2004, as Crain's reported, there were no fewer than 2,300 bank branchs in Metro Chicago, an 82% increase from ten years before. At the start of this year, there were nearly 100,000 nationwide. Walking our city's streets, you'd be forgiven for having the impression that America's primary industry was moving money around. (And up until a couple months ago, you may have been right.)

Analysts are expecting that, in many cases, the abandoned branches will simply be taken over by surviving banks looking to expand their local presence. When a failed bank is taken over by another bank not previously active in its markets, most branches will be converted rather than closed. And many of those that are shuttered may prove tempting to national retail chains able to get prime locations at a relative bargain.

Still, with bank consolidations continuing, the branch bubble has definitely burst, and many of the closed branches will probably remain vacant. Dark windows, like broken glass, are not a good thing. Someone, a private company, the city - or Craigslist - should set up a clearinghouse to match cheap, clean, empty storefronts with entrepreneurs with fresh ideas for reinvigorating the life of Chicago's neighborhood arteries.