Friday 11-12-99 bac shot up nearly $3.50 ( i believe date and amount to be correct) on news of legislation to allow banks into other sectors of the financial industry. Can someone tell me what these other industies are. I understand that allowing banks into other areas will,potentially,expose the banks bottom line to earnings that are not fee or loan based revenue. Depending on the fine print,would bac be able to better integrate parts of its operations like bac investment sevices (a wholly owned subsidiary) milking profit out of a streamlined management and better integration of the service. Any information would be helpful. Timothy
This legislation completes the reversal of the 1933 Glass-Steagall Act (see Great Depression), which kept banks out of the stock market and the insurance business and imposed other restrictions on bank holding companies. This act will allow banks, brokerage firms and insurers to enter each other's business, giving consumers and corporate clients alike a broader menu of financial services. Bank holding companies will now be allowed to own any securities firm, mutual fund company or other asset management business. Banks also will gain significant opportunities to increase global investing and be able to simplify many of the structures they have had to use in serving corporate customers. In addition, banks will be allowed to own insurance underwriters and agencies.The Treasury is stating that there will be an estimated $15 Billion savings in improved efficiency through streamlining alone! Besides, who needs interest income when you can charge some poor schmoe $10 for a trade that would cost the bank about 10 cents to process.
thanks for the info. Timothy Lammi
Mr dcwhippleIt astounds me that so few people seem to remember WHY the 1933 Glass-Steagall Act was passed in the first place!Everyone seems to think the repeal of this legislation is a good thing! Imagine, your bank owns a major insurance underwriter which insures Miami. Miami gets hit with a class 5 hurricane.Or, your bank owns the insurance underwriter which insurance the San Francisco finacial district, when its hit by the "next big one", i.e. earthquake.Or your bank "goes online", and into online investing in a big way. Encourages clients to open margin accounts to trade those wonderful Tech Stocks, and IPO's.Remember your history, or learn from your own experiences, but we've been down that road before.regards
So, your inference, TELenon, is that bank holding companies are not smart enough to enter the insurance and trading market? It seems to me that there are several insurance companies and investment firms that have managed to last for at least a year and not go under!If you are not inferring this, than are you stating that there is RISK in insurance and trading? I have been looking for a good business to start myself that is risk free, maybe you know of one, banking perhaps? My point is that risk is inherent in everything we do.You are nieve to think that examining risk is not a priority in any financial transaction, weither it be insuring a home, trading an option, or approving a line of credit. If the management of a company were managing this process irresponsably, I would think that they would have very little of the publics money to work with.Please don't think that for a second that banks, or the government, think history is not repeatable. I think you need to look outside the box and examine the other safeguards that have been put in place since the Glass Act. Government regulations are not limited to that particular act, the SEC and bank regulation authorities are well aware of the signs to look for in an instable institution.I guess the best I can tell you is that if you are a fatilist, sell any stock you may have in any financial institution and put it in a company that has no risk. Good luck and let me know if you find one!
I believe I have heard that the government is cutting funding for most regulatory functions! OF this is the case we may not be able to rely on regulators to spot problems. If just one of the large banks ran into serious problems it would effect the economy for years.
lhaselden wrote:I believe I have heard that the government is cutting funding for most regulatory functions! OF this is the case we may not be able to rely on regulators to spot problems. If just one of the large banks ran into serious problems it would effect the economy for years. Where does one find out how "our" govt and industry regulators are doing??Thanks for the post.Jon
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