Banking and Commerce: Tear Down this Wall?
FRB Richmond Economic Quarterly, Vol. 89, No. 2, Spring 2003, pp. 7-31
25 Pages Posted: 5 Dec 2012
Date Written: 2003
Abstract
Banking/commerce combinations, whereby a banking firm conducts commercial activities such as manufacturing, have long been prohibited in the United States. The traditional concerns with such combinations -- conflicts of interest and the spread of monopoly power -- are not compelling in today's competitive banking markets. But the danger that losses produced by commercial firms might be shifted to government-insured banks is significant. Tight regulatory controls over combined firms can minimize the danger. However, the cost of such controls might well exceed any benefits produced by banking/commerce combinations.
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