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In the Glass-Steagall sense, they probably shouldn't. Mixing commercial banking and investment banking was illegal from 1933-1999, and it is (arguably) one of t
by beambot 4y ago
In the Glass-Steagall sense, they probably shouldn't. Mixing commercial banking and investment banking was illegal from 1933-1999, and it is (arguably) one of the underlying factors in the 2008 financial crisis.
Note: There's a difference between being a custodian of customers' investments (brokerage / commercial banking) versus proactively investing customer deposits (investment banking).
- cmeacham98 4y agoGoing to need a _huge_ source on that claim. Investing customer funds is the primary way banks make their money, and has been that way essentially since the invention of banking. From https://en.wikipedia.org/wiki/Fractional-reserve_banking https://en.wikipedia.org/wiki/Fractional-reserve_banking: "Fractional-reserve banking predates the existence of governmental monetary authorities"
- oldgradstudent 4y agoBanks lend deposits. That's how they make their money. They have to keep some part of the deposits as a reserve. Real regulated banks have access to the Fed to borrow in a case of a bank run.
- mrep 4y agoAnd FDIC to de-risk customers from feeling they need to do a bank run.
- oldgradstudent 4y agoTo a large extent, but not completely. Anyone who has more than the insured amount, or anyone who needs their money in the near future will still engage in a run. There were several runs during the 2008 crisis, the most famous is the run on IndyMac Bank. https://en.wikipedia.org/wiki/IndyMac https://en.wikipedia.org/wiki/IndyMac