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The separation of banking and commerce

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  • John Krainer

Abstract

In the wake of the passage of the Gramm-Leach-Bliley Act, the separation of banking from commercial activity is now one of the few remaining pieces of Depression-era banking law. In this article I explore the incentives that banks and commercial firms might have to affiliate. I also outline some of the reasons why legislators might be hesitant to permit such affiliations.

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Bibliographic Info

Article provided by Federal Reserve Bank of San Francisco in its journal Economic Review.

Volume (Year): (2000)
Issue (Month): ()
Pages: 15-24

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Handle: RePEc:fip:fedfer:y:2000:p:15-24:n:2000

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Keywords: Gramm-Leach-Bliley Act ; Banks and banking;

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References

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  1. Berlin, Mitchell & John, Kose & Saunders, Anthony, 1996. "Bank Equity Stakes in Borrowing Firms and Financial Distress," Review of Financial Studies, Society for Financial Studies, vol. 9(3), pages 889-919.
  2. Kang, Jun-Koo & Stulz, Rene M, 2000. "Do Banking Shocks Affect Borrowing Firm Performance? An Analysis of the Japanese Experience," The Journal of Business, University of Chicago Press, vol. 73(1), pages 1-23, January.
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  8. Gorton, Gary & Schmid, Frank A., 2000. "Universal banking and the performance of German firms," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 29-80.
  9. Loretta J. Mester, 1992. "Banking and commerce: a dangerous liaison?," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 17-29.
  10. James, Christopher, 1995. "When Do Banks Take Equity in Debt Restructurings?," Review of Financial Studies, Society for Financial Studies, vol. 8(4), pages 1209-34.
  11. Kindleberger, Charles P., 1993. "A Financial History of Western Europe," OUP Catalogue, Oxford University Press, edition 2, number 9780195077384, September.
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  14. Saunders, Anthony, 1994. "Banking and commerce: An overview of the public policy issues," Journal of Banking & Finance, Elsevier, vol. 18(2), pages 231-254, January.
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  17. Randall S. Kroszner & Philip E. Strahan, 1998. "Bankers on boards: monitoring, financing, and lender liability," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
  18. Bester,Helmut Hellwig,Martin, 1987. "Moral hazard and equilibrium credit rationing: An overview of the issues," Discussion Paper Serie A 125, University of Bonn, Germany.
  19. Steven A. Sharpe, 1989. "Asymmetric information, bank lending, and implicit contracts: a stylized model of customer relationships," Finance and Economics Discussion Series 70, Board of Governors of the Federal Reserve System (U.S.).
  20. E. Gerald Corrigan, 1987. "A framework for reform of the financial system," Quarterly Review, Federal Reserve Bank of New York, issue Sum, pages 1-8.
  21. Simon H. Kwan & James A. Wilcox, 1999. "Hidden cost reductions in bank mergers: accounting for more productive banks," Working Papers in Applied Economic Theory 99-10, Federal Reserve Bank of San Francisco.
  22. Merton, Robert C., 1977. "An analytic derivation of the cost of deposit insurance and loan guarantees An application of modern option pricing theory," Journal of Banking & Finance, Elsevier, vol. 1(1), pages 3-11, June.
  23. Allen N. Berger & Gerald A. Hanweck & David B. Humphrey, 1986. "Competitive viability in banking: scale, scope, and product mix economies," Research Papers in Banking and Financial Economics 82, Board of Governors of the Federal Reserve System (U.S.).
  24. Randall J. Pozdena, 1991. "Why banks need commerce powers," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 18-31.
  25. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1990. "The Role of Banks in Reducing the Costs of Financial Distress in Japan," NBER Working Papers 3435, National Bureau of Economic Research, Inc.
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Cited by:
  1. John R. Walter, 2003. "Banking and commerce : tear down this wall?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 7-31.
  2. Stefan ARPING, 2000. "Banking, Commerce, and Antitrust," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 00.22, Université de Lausanne, Faculté des HEC, DEEP, revised May 2002.
  3. Sanjay Banerji & Andrew Chen & Sumon Mazumdar, 2002. "Universal Banking Under Bilateral Information Asymmetry," Journal of Financial Services Research, Springer, vol. 22(3), pages 169-187, December.
  4. Larry D. Wall & Alan K. Reichert & Hsin-Yu Liang, 2008. "The final frontier : the integration of banking and commerce. Part 1, the likely outcome of eliminating the barrier," Economic Review, Federal Reserve Bank of Atlanta.

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