Investment banking + Commercial Banking = one big mess
I was glancing over what Volcker had to say to congress recently and one thing that jumped out on me was the fact that finds that the conglomeration of investment banking and commercial banking is dangerous. He advocates the separation between the two. Here is what he had to say:
The point is not only the substantial risks inherent in capital market activities. There are deep-seated, almost unmanageable, conflicts of interest with normal banking relationships - individuals, businesses, investment management clients seeking credit, underwriting and unbiased advisory services. I also think we have learned enough about the challenges and distractions for management posed by the risks and complexities of highly diversified activities.
It's interesting to find a person with such high caliber advocating for this separation. It also touches on what Edmundo's recent post about the Glass-Steagel act.
What do you guys/gals have to say about this? where do you stand?
Goldman is way ahead of the curve on this one, as usual. Rumor has it that they are exploring dropping their bank holding company status to avoid any government interference into their compensation practices.
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well, and because the bank holding company status sets higher capital requirements for them. and because it leads to college students asking when they can use their GS atm. and because they never wanted to be one to begin with. but yeah, i'm sure glass-steagal is somewhere on that list. and compensation practices mandated by napoleon jr.
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