BANKINDUSTRYCLASS

BANKINDUSTRYCLASS - 1 Banking Industry Structure Regulation...

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Unformatted text preview: 1 Banking Industry: Structure, Regulation, Failures and Changes ¡ Key Points ¡ Development of U.S. Banking 1 ¡ Financial Innovation and Changes in Banking ¡ Structure of Banking ¡ Regulation ¡ The S&L and Banking Crises of the 1980s ¡ International Banking Crises ¡ The Current Crisis and Regulatory Changes In the News? 2 Barney Frank, chairman of the House Financial Services Committee Course Issues ¢ Investment Game 3 ¢ Extra Credit ¢ Gradebook 3 2 Investment Game ¡ ¡ Investment Game 1,2 ¡ 3 4 Selected HW 5 Walter Bagehot ¡ Lend freely at a high rate against good collateral ¡ Support illiquid but 6 ¡ Support illiquid but solvent institutions 3 U.S. Banking History ¡ Bank of North America-first bank of colonies ¡ First Bank of the U.S. 1791 – Hamilton – Central Bank ¢ Favoritism, power ¢ Charter not renewed 1811 ¡ Second Bank of U.S. 1816-1936 ¢ Political favoritism, etc ¡ State chartered banks – Free Banking Era ¢ Notes against gold,silver coins ¢ Excesses, notes traded at discounts, etc. ¢ Wildcat banks 7 More ¡ National Banks- Banking acts 1863,65 ¢ Office of comptroller of currency, chartered national banks, ¢ National currency – greenbacks ¢ Taxed bank notes out of existence – demand deposits instead ¡ Federal reserve 1913 – Banking regulation etc ¡ Glass Steagall 1933 – separated commercial and investment banking 8 Odd Structure of U.S. Banking? ¡ “Too Many, Too Small Banks” ¢ Historical Branching Restrictions ¢ Compared to other major nations ¡ “Dual Banking System – split regulation ¢ Evolution of banking in u.s. – state and federal 9 ¢ Now State, Federal – Fed, Comptroller of Currency, FDIC ¡ Restrictions on activities - Glass Steagall 1933 ¢ Gramm-Leach-Bliley Financial Services Modernization Act ¡ end of Glass Steagall 1999 ¡ Universal Banking ¢ Germany, Netherlands, Switzerland 4 Glass Steagall ¡ Banking Acts of 1933 (Glass-Steagall) and 1935 ¡ Carter Glass- senator, treas sec. author fed act and Glass Steagall ¡ Separated commercial banking from the securities industry ¢ JP Morgan versus Morgan Stanley and back again ¢ Also: FDIC, checkable deposits to commercial banks, no interest payments on checkable deposits, Placed interest rate ceilings on savings 10 and time deposits (Q). ¡ Gramm-Leach-Bliley Financial Services Modernization Act ¡ end of Glass Steagall 1999 ¡ Universal Banking ¢ Germany, Netherlands, Switzerland ¡ The return? Banking Changes ¡ Consolidation ¡ Economies of scale and scope arguments ¡ more diversification ¡ Vs. monopolization, Community Bank concerns ¡ Due to regulatory changes ¡ Share of credit fallen 11 ¡ Share of credit fallen ¢ loss of advantages in obtaining and using funds ¡ substitutes for deposit accounts ¡ substitute sources of funds for borrowers – cp, etc ¢ move into commercial real estate lending ¢ off-balance sheet areas – fees and risk Financial Innovations – technology, regulation, profits ¡ Supply and Demand for Innovation...
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This note was uploaded on 02/20/2012 for the course 220 301 taught by Professor Carlshu-minglin during the Fall '10 term at Rutgers.

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BANKINDUSTRYCLASS - 1 Banking Industry Structure Regulation...

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