Publications: The Separation of Banking and Commerce in the United States:
an Examination of Principal Issues
by Bernard Shull
Hunter College of the City University of New York
This project was undertaken while the author was a Visiting
Scholar in the Office of the Comptroller of the Currency. All of the
views expressed are his own and should not be interpreted as representing
those of the Office of the Comptroller of the Currency or its
representatives.
Abstract
Banking law and regulation in the United States have
customarily restricted the nonbanking activities of banks and the banking
activities of nonbanking firms, producing a separation of banking
from commerce. While such separation is surprising in a free
market system that, in general, permits private firms to engage in any
lawful business, it is understandable in an historical and institutional
context. Proposals for change raise a wide range of economic and other
issues. This paper identifies, catalogues, and elaborates these issues to
provide a framework for informed judgment and further investigation. It
begins with a review of early restrictions on bank activities in the
United States and contrasts U.S. developments with those in several other
countries in which banks have not been separated from commercial and industrial
firms. It, then, reviews relevant issues arising in the financial
sector, commercial sector, related to central banking and supervision, and
socio-political concerns. It concludes that limited banking, as it exists in
the United States, and universal banking, as it exists in other countries, have
differential benefits and costs. Summary evaluation based on standard cost-
benefit analysis, however, presents serious difficulties. Considerable
uncertainty remains about effects in a number of areas. Many of the costs and
benefits are not quantifiable, and some that are quantifiable are incomparable.
A careful review of all existing evidence, identification of gaps, and further
investigation is needed.
Disclaimer
As with all OCC Working Papers, the opinions expressed in this paper are those of the author alone, and
do not necessarily reflect the views of the Office of the Comptroller of the Currency or the Department of the Treasury.
Any whole or partial reproduction of material in this paper should include the following citation:
Shull, "The Separation of Banking and Commerce: an Examination of Principal Issues,
" Office of the Comptroller of the Currency, E&PA Working Paper 99-1, April 1999
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