* Economic
That banks with the 'deal power' of Goldman and Morgan would set themselves up to the scrutiny of the Fed (adopting a commercial bank) is just amazing. These banks made the money they made and had the salaries/bonuses to go with it because they had little regulation with respect to commercial banks.
* Power Jobs / Career Tracks
I don't know what the bulk of MBA's will aspire to now -- or Hollywood for the matter. Investment banking was regarded as a golden standard for 'making it'. So no more, now that investment banking has gone down the toilet.
* Regulation / Legislation
Ironic, but the Glass-Steagall Act which was enacted in 1933 after the great depression was precisely the OPPOSITE: To separate commercial banking from investment banking!
REF: http://www.fdic.gov/regulations/laws/important/index.html (So it looks like the cycle has started once again)
>* Power Jobs / Career Tracks I don't know what the bulk of MBA's will aspire to now -- or Hollywood for the matter. Investment banking was regarded as a golden standard for 'making it'. So no more, now that investment banking has gone down the toilet.
These companies will still be conducting Investment Banking activities. There are other bank holding companies who also own investment banks (Citigroup, and I believe JP Morgan, in addition to a host of foreign banks like UBS). What this means is that they will be forced to adopt capital requirements and other regulation in their portfolio business and take on two new regulators in exchange for more financial stability from deposits and access to Federal Reserve funds.
>* Regulation / Legislation Ironic, but the Glass-Steagall Act which was enacted in 1933 after the great depression was precisely the OPPOSITE: To separate commercial banking from investment banking! REF: http://www.fdic.gov/regulations/laws/important/index.html (So it looks like the cycle has started once again)
Preventing deposit-taking institutions from taking risky activities is of much less importance now that there is an FDIC. Also, having diversified business lines should make these firms less likely to fail. Glass-Steagal made firms more fragile. You don't see JP Morgan, Citigroup, Wachovia, or B of A getting bought out, yet.
What was the point of Glass-Steagall? I've heard justifications about banks underwriting a bond and then having the commercial bank buy it, but these justifications never agree on who is defrauding whom. It is very easy for an investment bank and a commercial bank to make that kind of deal even if they don't share a corporate parent ("Oh, you want in on the next big IPO? Well, let me tell you how to get to the top of the list! I just need one little favor...").
Actually, all of the justifications I've heard seem to imply that Glass-Steagall was necessary to criminalize things like fraud and undisclosed conflicts of interest, which I thought were already illegal.
[+] [-] drubio|17 years ago|reply
* Economic That banks with the 'deal power' of Goldman and Morgan would set themselves up to the scrutiny of the Fed (adopting a commercial bank) is just amazing. These banks made the money they made and had the salaries/bonuses to go with it because they had little regulation with respect to commercial banks.
* Power Jobs / Career Tracks I don't know what the bulk of MBA's will aspire to now -- or Hollywood for the matter. Investment banking was regarded as a golden standard for 'making it'. So no more, now that investment banking has gone down the toilet.
* Regulation / Legislation Ironic, but the Glass-Steagall Act which was enacted in 1933 after the great depression was precisely the OPPOSITE: To separate commercial banking from investment banking! REF: http://www.fdic.gov/regulations/laws/important/index.html (So it looks like the cycle has started once again)
[+] [-] Prrometheus|17 years ago|reply
These companies will still be conducting Investment Banking activities. There are other bank holding companies who also own investment banks (Citigroup, and I believe JP Morgan, in addition to a host of foreign banks like UBS). What this means is that they will be forced to adopt capital requirements and other regulation in their portfolio business and take on two new regulators in exchange for more financial stability from deposits and access to Federal Reserve funds.
>* Regulation / Legislation Ironic, but the Glass-Steagall Act which was enacted in 1933 after the great depression was precisely the OPPOSITE: To separate commercial banking from investment banking! REF: http://www.fdic.gov/regulations/laws/important/index.html (So it looks like the cycle has started once again)
Preventing deposit-taking institutions from taking risky activities is of much less importance now that there is an FDIC. Also, having diversified business lines should make these firms less likely to fail. Glass-Steagal made firms more fragile. You don't see JP Morgan, Citigroup, Wachovia, or B of A getting bought out, yet.
[+] [-] byrneseyeview|17 years ago|reply
Actually, all of the justifications I've heard seem to imply that Glass-Steagall was necessary to criminalize things like fraud and undisclosed conflicts of interest, which I thought were already illegal.
[+] [-] known|17 years ago|reply
[+] [-] kul|17 years ago|reply
I wonder if they can reverse this status change in a few years.
[+] [-] veritas|17 years ago|reply
2. This, from what I know, seems like a terrible move.
[+] [-] agotterer|17 years ago|reply
[+] [-] mqatrombone|17 years ago|reply