The flurry of bank mergers that may help save the U.S. financial system from collapse will make it easier for the new banking behemoths to charge consumers higher interest rates on mortgages and credit cards – and antitrust enforcers won’t be able to stop them.

The top tier of the U.S. banking industry has changed drastically since March, when JPMorgan Chase & Co agreed to buy the investment bank Bear Stearns Cos.

Since then, Lehman Brothers Holdings Inc has sunk into bankruptcy, JPMorgan has absorbed the failed Washington Mutual Inc, Bank of America Corp has completed its purchase of Countrywide Financial Corp and agreed to salvage Merrill Lynch & Co, and Wells Fargo & Co has said it will absorb Wachovia Corp.

The mergers leave just four lenders – Bank of America, Wells Fargo, JPMorgan and Citigroup Inc – as originators of 65.4 percent of U.S. mortgages and servicing 54.4 percent of the nation’s mortgage market, according to the newsletter Inside Mortgage Finance.

Bank of America leads the mortgage origination pack with 22.6 percent of mortgages, followed by Wells Fargo at 18.8 percent, JPMorgan at 16.1 percent and Citi at 7.9 percent, according to the newsletter.

Antitrust lawyers familiar with the banking industry warn that as the top tier gets smaller, it will be easier for the banks to monitor prices charged by rivals. This will make it easier for banks to push up interest rates and fees paid by consumers, who are already footing a $700 billion bill to bail out the financial sector.

“The smaller the number of competitors, the fewer the competitive constraints on tacit coordination,” said Bruce McDonald, a former deputy assistant attorney general in the Bush administration. “Of course, explicit coordination is unlawful and results in criminal prosecution,” said McDonald, now with the law firm Jones Day.

Other antitrust experts disagree, saying competition among banks will keep fees and rates from soaring. But the sheer size of the industry leaders is raising concern in some quarters.

Historically, bigger institutions have led to higher fees, said Travis Plunkett of the Consumer Federation of America.

“The obvious concern that consumer groups will have is that choices will be limited and services will be more expensive,” said Plunkett.

He said his group is already pushing for some bank fees to be reined in. One example is an “overdraft loan,” where a bank covers a check despite insufficient funds and charges the consumer up to $40. A bill to require consumer permission to levy such a charge has passed the House and is in committee in the Senate.

Counting Card Companies

The disappearance of Wachovia and Washington Mutual, which offered relatively favorable terms for consumers, will make credit cards even more expensive for people who carry balances, according to CardRatings.com founder Curtis Arnold.

The leading credit card issuers are JPMorgan Chase, with a 20.9 percent market share in unpaid credit card balances; Bank of America at 19.4 percent, Citigroup at 13.3 percent, American Express Co at 11.4 percent and Capital One Financial Corp at 7 percent, according to the Nilson Report.

“Card holders as a whole are going to suffer because of this consolidation,” said Arnold.

Banks will find it easier to coordinate prices, much as the airline industry did earlier this year in charging travelers to check baggage as high fuel costs threatened their bottom lines, said Andrew Gavil, a law professor at Howard University.

“It’s legal and we can’t challenge it,” said Gavil. “One of the reasons we have antimerger laws is to prevent industries from following that structure.”

Gavil urged regulators to slow down and give future merger requests more scrutiny than was given to JP Morgan’s acquisition of Bear Stearns and later deals. The acquisitions of Bear Stearns, Merrill Lynch and Wachovia won U.S. antitrust approval in less than a month.

Joseph Stiglitz, a Columbia University economist who won the Nobel Prize in 2001, told a recent House Financial Services Committee hearing there had been “a general failure to enforce antitrust laws” in the last few years.

“We have to think about breaking up some of the big banks and realizing that actually the economies of scale are not as big,” he said.

But antitrust experts are not unanimous on the subject.

Steve Axinn of the law firm Axinn, Veltrop and Harkrider LLP said the barriers to entry in banking are so low that if big banks push prices too high, they will lose customers to lean, mean newcomers.

Evan Stewart, a partner at Zuckerman Spaeder LLP, described the banking industry as “fiercely competitive.”

“If anything, in the past month it’s only gotten fiercer as companies have looked around and said, ‘Are we survivors?”‘ he said.