Were Banks Ever ‘Boring’?
In a previous post, I documented that much of the expansion into nontraditional activities by U.S. banks began well before the passage of the Gramm-Leach-Bliley Act in 1999, the legislation that repealed much of the Glass-Steagall Act of 1933. The historical record actually contains many prior instances of the Glass-Steagall restrictions being circumvented, with nonbank firms allowed to operate as financial conglomerates and engage in activities that go beyond traditional banking. These broad industry dynamics might indicate that the business of banking tends to expand firm boundaries beyond a traditional—“boring”—perimeter.
Were Banks ‘Boring’ before the Repeal of Glass-Steagall?
Since the global financial crisis and Great Recession, many critics have called for regulatory and legislative reforms to restore a system of “boring” banks constrained to traditional banking activities like deposit taking and lending.