What is financial modernization about?
The central idea behind financial modernization is to permit broad affiliations between banks, securities firms, insurance companies, and other “financial” businesses. Such legislation would facilitate the creation of “financial supermarkets” offering “one-stop financial shopping” to consumers. Modernization involves significant changes to the Glass-Steagall and Bank Holding Company Acts, two laws that currently prevent such broad affiliations. Allowing and encouraging the formation of financial conglomerates raises questions as to how they will be supervised and regulated in the public interest. Thus, modernization also calls for a blend of “functional regulation” of the individual businesses – for example, banks regulated by banking regulators and securities firms by the SEC and “umbrella supervision” of the consolidated entities by the Federal Reserve. Why is modernization important? The public would benefit from the greater convenience of the one-stop shopping concept. In addition,
