New Regulation Will Drive Trends in the Financial Services Industry-Again

By Pitti, Don | Review of Business, Spring 2009 | Go to article overview

New Regulation Will Drive Trends in the Financial Services Industry-Again


Pitti, Don, Review of Business


  Humpty Dumpty sat on a wall
 Humpty Dumpty had a great fall
  And all the King's horses
   And all the King's men
       Could not put
 Humpty Dumpty together again

Since the mid 1970s trends in the financial services industry have been driven by the efforts of the companies in the industry to reform the Glass Steagall Act of 1933 that prohibited them from conducting banking, investment and insurance activities in the same corporate entity. Those efforts culminated in 1999 with the passage of the Gramm Leach Bliley Act, allowing for the creation of bank or financial services holding companies that could conduct those activities under a single corporate structure. This resulted in the recent dominant trend in the industry: the efforts of companies to integrate the manufacturing and delivery of financial services to consumers and businesses. Citigroup, the amalgamation of Citibank, Salomon Smith Barney and Travelers Insurance, epitomized this new financial services model. When Citigroup had difficulty making the model work, supporters of the concept maintained that the model was right, Citi was just doing it wrong.

Then came the subprime mortgage mess, the implosion of Bear Stearns, the failure of Lehman Brothers, AIG and the credit crisis, etc. The entire financial services industry has had a great fall, and the whole idea of the financial services holding company has come under question. It has also become clear that Gramm Leach Bliley failed to allow for the regulation of the new hybrid products these entities could now create, own, package and sell, products like black box CDO's and credit default swaps that fell between the cracks of functional regulation.

The result of recent events is that there is a clamor for new regulation to replace Gramm Leach Bliley, and once again the specter of new regulation will be the driving force of trends in the financial services industry. While it is obviously difficult to predict what the new regulation will bring, a review of the proposals that are being made by the Treasury, Congress and the industry leads me to the following conclusions. There will be sweeping, new financial services regulation--let's call it the Frank-Schumer Financial Services Act of 2010--that will create regulatory structure modeled after the Financial Services Authority (FSA) in the United Kingdom, which integrated nine regulators in 1998.

The FSA in the U.K. is a single, self-regulatory body that regulates the entire financial services industry in that country. It is accountable to Her Majesty's Treasury and through it to Parliament. The FSA's responsibilities are separated into three sectors: Retail Markets, Wholesale and Institutional Markets and Regulatory Services. There are sector leaders for Auditing and Accounting, Asset Management, Capital Markets, Financial Stability, Banking, Insurance, Retail Intermediaries and Mortgages, all under one regulatory umbrella.

Given the current political environment in the United States and the recent real and perceived abuses in our financial system, it is highly unlikely that new financial services regulation here will be self-regulatory in nature. However, I believe that the Frank-Schumer Act will create a single regulator for all banking, insurance and investment activities in the U.S. It will be responsible to the Treasury and through it, to the Congress. Its governance will consist of a Board of Overseers, a Chairman and Vice Chairman for Banking, Insurance, Investments and Consumer Protection, and such departments that are necessary to carry out its responsibilities.

The Banking Division will assume the regulatory responsibilities and powers that the Treasury, Federal Reserve, and Comptroller of the Currency now have concerning banking activities, and will coordinate its efforts with those agencies. The SEC, with some modifications and expanded powers, budgets and staff, will be responsible for the investment activities of the industry. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

New Regulation Will Drive Trends in the Financial Services Industry-Again
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.