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The separation of banking and commerce

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

Volume (Year): (1998)
Issue (Month): jul3 ()

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Handle: RePEc:fip:fedfel:y:1998:i:jul3:n:98-21
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  17. 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.
  18. Randall J. Pozdena, 1991. "Why banks need commerce powers," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 18-31.
  19. Kindleberger, Charles P., 1993. "A Financial History of Western Europe," OUP Catalogue, Oxford University Press, edition 2, number 9780195077384, December.
  20. 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.
  21. Dilip Mookherjee & Ivan Png, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 399-415.
  22. Mitchell Berlin & Kose John & Anthony Saunders, 1995. "Bank equity stakes in borrowing firms and financial distress," Working Papers 96-1, Federal Reserve Bank of Philadelphia.
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  24. Brennan, Michael J & Maksimovic, Vojislav & Zechner, Josef, 1988. " Vendor Financing," Journal of Finance, American Finance Association, vol. 43(5), pages 1127-41, December.
  25. 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.
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