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- Title
The Separation of Banking and Commerce Reconsidered.
- Authors
Halpert, Stephen K.
- Abstract
This Article closely examines the separation of banking and commerce, identifies the separation's purposes, and evaluates the fit between its means and ends with the objective of promoting the rationalization of bank regulatory policy. First, this Article briefly sketches relevant current banking law. Second, this Article exhumes the historical purposes of the principal relevant federal laws and analyzes these purposes through the conceptual lenses of law and economics. The separation initially was copied from English law and subsequently was expanded for two principal reasons: to relieve bank panics and, later, to alleviate the perceived tendency of the financial sector to assume unacceptable levels of economic aggregation and power. This Article concludes that neither of these historical purposes justifies incurring the costs of existing law. Third, this Article broadens the inquiry to consider the proposition of some contemporary banking experts that the separation is desirable to counter a tendency of federally insured banks to undertake excessive risks. While it is true the separation probably reduces the incidence of bank failure, the welfare significance of this effect is ambiguous. Last, this Article elaborates on the preceding section by attempting to weigh approximately the costs and benefits of the separation and by considering alternative regulatory strategies.
- Subjects
UNITED States; BANKING laws; NONBANK financial institutions -- Law &; legislation
- Publication
Journal of Corporation Law, 1988, Vol 13, Issue 2, p481
- ISSN
0360-795X
- Publication type
Article