Entire books can be written about the changes in the banking industry. Banks will continue to make changes for as long as there are banks in existence. It’s a dynamic system. While it may be interesting to some people to read about the historical changes to the banking industry, most people are simply looking for the latest changes, and how that may affect them personally.
Very recently, President Obama has been on television discussing the changes he wants to see happen in regards the banking industry. He is calling for tougher bank regulations. Some changes would include allowing the government to restrict large banks that combine both commercial and investment banking from doing proprietary trading, which is considered to be high risk. There is also an interest in having the government prevent banks from becoming too large.
What does all this mean? Every bank gets money from the people who make deposits into their individual savings and checking accounts. The FDIC protects this money. In the past, some banks have used this money to make investments. Often these investments included hedge funds, real estate investments, and other things that the bank was able to make a profit on. This would no longer be allowed. In addition to that, the government would be allowed to prevent banks from getting “too large to be allowed to fail”.
There are differing opinions about how these changes are going to affect the banks, the economy, and the people who use the banks. On one side, there is the belief that these changes will prevent something like the recent mortgage crisis from happening again. There is the idea that allowing the government to create smaller banks will prevent the necessity of future bank “bailouts”. It would prevent banks from claming they cannot pay back the bailout money they received without increasing credit card rates, while at the same time paying large amounts of money to it’s investors and CEOs.
The opposing viewpoint is that these changes will not produce the desired effect. Some feel that these changes unnecessarily punish banks. There is belief that banks will separate from their financial branches, and continue current practices. Some banks claim that without access to their current means of making money, they will be forced to increase credit card rates, to begin charging people to have checking accounts, and to add additional fees to continue to make profits.
