The Business of Banking: Before and After Gramm-Leach-Bliley

Abstract

This Article will argue that the Granm-Leach-Bliley Act was based on a premise about the business of banking that is fundamentally false. The articulated rationale for the passage of the Act was that technological developments had already occurred that eviscerated the traditional distinctions between these two activities. These technological innovations were making traditional commercial banking obsolete. Under this view, if the nation's commercial banks were to survive, they would have to move into new, more profitable areas like investment banking. As Laurence H. Meyer, a member of the Board of Governors of the Federal Reserve put it, "Part of the motivation for the [new] bill was to put US banking organizations in a more competitive position. To the extent that securities and banking are increasingly interconnected activities with power synergies, US banking organizations are better able to play in the global arena than they were before."