BANKINDUSTRYCLASS

BANKINDUSTRYCLASS - 1 Banking Industry: Structure,...

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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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BANKINDUSTRYCLASS - 1 Banking Industry: Structure,...

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