Banking and Financial Institutions Law in a Nutshell
Authors:
Malloy, Michael P. / Lovett, William A.
Edition:
9th
Copyright Date:
2019
15 chapters
have results for banking
Chapter II Money and Banking 35 113 results (showing 5 best matches)
- The next major financial development was enactment of the banking legislation in March 1863. With 11 agrarian states out of the Congress, it was possible to take a substantial step toward federal coordination and strengthening of the banking system. Under this legislation banks were “encouraged” to recharter themselves as national banks, with the Comptroller of the Currency as the new agency for screening and supervision. Modest capitalization requirements were involved, although somewhat stronger reserves against deposits were mandated: (i) 25 percent for “reserve city” banks; (ii) 15 percent for “country” banks. However, reserve banks outside New York City could keep half their reserves in interest-bearing accounts in N.Y.C. banks; meanwhile, country banks could keep three-fifths of their reserves in interest bearing accounts in any reserve bank. Initially a small tax (½ percent annually) was placed on average banknote circulation for all banks. But when relatively few state banks...
- The Federal Reserve Banks would carry on lending operations to member banks, rediscounting 90-day commercial paper or six-month agricultural obligations. The discount rates for such lending would be a discipline on member banks. In addition, reserve requirements were specified for demand deposits in all the member banks: 18 percent for reserve city banks, 15 percent for city banks, and 12 percent for country banks. On time deposits all banks had to maintain 5 percent reserves. Along with this statutory power, the Federal Reserve Board received financial supervision authority, and the right to enforce special reports from all member and reserve banks, to suspend and remove officers, and to suspend District banks. The Board could also allow District banks to make loans to each other. Thus, financial integrity and emergency lending support would be assured to all member banks, in all Districts of the country.
- But gradually the tendencies toward decentralized, state charter banking resumed their influence. As shown in Chapter I, state banks grew in number from 475 in 1878, to 8,696 in 1900 and 17,440 in 1929. Meanwhile, national banks increased their numbers more slowly, from 2,056 in 1878, to 3,731 in 1900 and 7,530 in 1929. The share of deposits in state banks grew from 7 percent in 1868 to 18 percent in 1878, 43 percent in 1900, and reached 56 percent in 1929. Key factors were rapid development of checking accounts as a substitute for banknotes, which allowed state banks to compete effectively, together with more relaxed, liberal reserve requirements and easier chartering and entry for state banks. Eventually, national bank charter and reserve requirements were liberalized, too, so that national banks could compete more equally, and their numbers expanded very substantially. A final factor was the prohibition on branching for national banks in the National Bank Act of 1864 (NBA)....
- But more action quickly followed to ensure public confidence in money and banking. Most significant, for the long term, was the Banking Act of June 16, 1933. This law established the Federal Deposit Insurance Corporation. The FDIC expanded the old New York safety fund concept (1829–1837), and created a federal insurance guarantee system for bank deposits up to $2,500 (now a “standard maximum deposit insurance amount” of $250,000, to be periodically adjusted for inflation) on each account. Its initial capital was provided by the Treasury and the surplus in Federal Reserve District Banks, and was replenished by modest insurance premiums on the insured banks. Virtually all banks joined the new system (whether national or state chartered), because most depositors wanted this protection for their bank deposits. Every normal commercial bank now maintains this insurance to stay in business. This provided much greater supervisory leverage for bank examination purposes. The FDIC staff, along...
- While opposition from state bank and agrarian interests prevented charter renewal for the first Bank of the United States in 1811, the War of 1812 promptly proved the need for a more reliable note issue and a strong method of federal government borrowing. Many state banks had become increasingly lax, and it was widely felt that specie redeemability should be enforced more systematically for bank notes. Accordingly, Congress created the second Bank of the United States in 1816. The new “national” bank was larger, with $35 million share capital (one-fifth from the federal government) and stronger powers. Congress also required all payments to the government to be made in specie, Treasury notes, or notes of the Bank of the United States. At first, Bank leadership was lenient, allowed extensive loans, and accepted too many state bank notes for deposit without proper specie redemption, which encouraged a land speculation boom and a subsequent recession in 1819. Meanwhile, the Supreme...Bank
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Chapter I Evolution of Banking and Financial Institutions Law 1 60 results (showing 5 best matches)
- In most countries, corporate banks were chartered to supplement national banks and private family (or partnership) banks. Gradually, corporate banks outgrew private banks, and took over the leading role in bank finance. This allowed more banking activity and competition, which flourished when checking accounts and bank drafts became almost as reliable as currency. Wealthier individuals would provide the initial corporate bank capital, and additional shares might be sold to the general public. Some risk of insolvency existed, though, for corporate banks that lacked the support and guarantee of deposits that governments could provide. Although a large, successful bank corporation might offer more strength and reliability than the typical private family bank, the danger of mismanagement, a weak loan and investment portfolio, or bad luck in wars, depressions or financial panic meant that runs and ...risks increased with easy entry for small, under-capitalized banks that often popped up...
- The Federal Reserve System established in 1913 evolved out of a search for consensus among bankers, politicians, and some academic experts. It was a move toward “central bank” regulation in the European sense, though weaknesses were not evident until the Great Depression. The major features were: (i) an association of District Federal Reserve banks regulated by a Board of Governors, appointed by the President. (ii) Every national bank was required to be a member, and state banks were allowed to become members. (iii) Member banks had to purchase district reserve bank stock equal to 6 percent of their capital and surplus. (iv) Member banks had to maintain reserves against their demand and time deposits (from 12–18 percent and 4 percent, respectively). (v) Member banks could get loans from their district reserve bank by discounting commercial paper. (vi) District reserve banks would issue Federal Reserve notes (“currency”) fully secured by commercial paper and gold reserves. (vii)...banks
- Another significant development in postwar banking law was the increased importance of antitrust policy, and concern for adequate competition in financial markets. Because new entry into banking slowed greatly since the 1930s, while bank mergers, holding companies, consolidations, and branching became more widespread, Congress and the antitrust authorities imposed constraints. The Bank Holding Company Act of 1956 limited “chain banking,” in which a bank holding company would expand its market by acquiring a string of bank subsidiaries. The Bank Merger Acts of 1960 and 1966 (along with the Supreme Court’s decision in
- During the Civil War, with eleven Southern and agrarian states out of the Congress, it was possible to enact stronger federal banking legislation. The National Bank Act of 1864 encouraged federal chartering of privately owned banks with modest capitalization requirements, but imposed stronger reserve requirements and limitations on the note issue of federally chartered banks. These were officially called “national banking associations,” or more commonly “national banks,” but they are commercial enterprises, not quasi-central banks like the first and second Banks of the United States or “national banks” in other countries.
- State banking reached a low ebb after the Panic of 1873 and the subsequent depression, when many more state banks failed than national banks. In 1878 there were 2,056 national banks with $653 million deposits, and only 475 state banks with $143 million in deposits. But rivalry in chartering, less restrictive requirements, and the growing importance of checkbook money led to a more rapid revival of state banks. The country seemed to like easier banking.
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Chapter III Banking Market Regulation 143 272 results (showing 5 best matches)
- Bank merger regulation has gone through three different stages: (1) bank mergers were restricted to limit consolidation and preserve the traditional, largely decentralized U.S. banking market structure. Competition among depository institutions was maintained, and even enhanced by growth of savings banks, S & LS, and credit unions. (2) limitations on bank growth and mergers were relaxed in a gradual, incremental pattern. But no drastic increases in concentration or reduced competition occurred, even though the numbers of U.S. banks slowly declined over these 20 years from 14,600 to 10,500, savings banks and S & Ls from 5,400 to 2,200, and credit unions from 21,000 to 12,500. (3) there has been more drastic relaxation of bank merger and BHC restrictions, which allowed much larger consolidation mergers, big chains of megabanks, and substantially weaker competition in many regional and local banking markets. By 2008 the number of U.S. banks fell further to 7,300 with only 1,260...
- Foreign banks have a range of options in the United States that is broader, in some respects, than alternatives U.S. banks enjoy to carry on activities abroad. Representative offices and agencies are the more limited connections, which are most widely employed. Investment companies are authorized for foreign banks in some states. Since 1978 Edge Act Corporations are allowed for foreign banks, too. But in addition, many foreign bank branches, subsidiaries, and even foreign owned U.S. banks have been established, some of which have domestic deposit collection and lending authority comparable to U.S. banks in many states. Until the International Banking Act of 1978, foreign banks also enjoyed a special freedom from the McFadden-Douglas restrictions on interstate branching. But the proliferation of foreign bank activities finally provoked Congress into eliminating most of these ..., mandating equal treatment for foreign- and domestic-owned banks. Such a broad principle of parity is not...
- Commercial banking is extensively regulated for potential entrants, chartered bank corporations, and bank holding companies. Banks are subject to financial supervision and regular examination, with substantial corrective authority for dangerous practices. Reserve requirements are enforced for banks, and their capital adequacy is an important concern of the regulatory authorities. The growth of banks, along with their branching, diversification and merger activity is regulated. Significant limitations also apply to other bank activities, including lending limits, insider lending, some restrictions on investments and certain types of deposit liabilities. Interest rate ceilings were placed on some deposits, and interest on demand deposits had been prohibited (between 1933–1980). There are disclosure requirements and privacy safeguards for borrowers and depositors. Although about 4,900 banks and 752 savings associations ( ...banks, savings & loan associations, and similar institutions)...
- Three federal banking agencies, the Office of the Comptroller of Currency (“OCC”), the Federal Reserve Board, and the Federal Deposit Insurance Corporation (“FDIC”), along with the state banking departments or commissioners, are the major regulatory agencies for bank market regulation. At the federal level, the OCC is the oldest agency, having served since 1863 as the chartering authority for national banks, and their primary agency for the supervision and examination process. The Federal Reserve Board, created in 1913, also has supervision and examination authority for state chartered banks that are members of the Federal Reserve System, and has become increasingly important as the most general regulatory agency for banking under many recent enactments (covering mergers, bank holding companies, truth-in-lending, fair credit reporting, and certain aspects of interstate and multinational banking.) ...became a collateral supervising agency in 1933 for all national banks, and virtually...
- The tradition of bank examination and supervision in the United States goes back to the 19th Century. More successful bank supervision and examination effort followed in the wake of New Deal reforms and the FDIC in 1933. Comprehensive reporting responsibilities have been established, including regular “call reports” or reports of financial condition and income (on a quarterly basis, although some schedules of information are filed annually for smaller banks and savings associations, and quarterly for very large banks and savings associations), and regular examinations (annually for most banks and savings associations, and every 18 months for relatively small, well-capitalized and well-managed banks and savings associations). Special reports and examinations are imposed by the banking authorities for “problem banks”, and almost ...banks facing imminent or likely failure. Because of this supervision regime, made increasingly easy, in some respects, by electronic data processing...
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Chapter IV Thrift Institutions 287 71 results (showing 5 best matches)
- Banking lobbies, however, have been challenging the tax exempt status of credit unions as mutual, non-profit savings associations. Banks reason that credit unions should lose their tax preference (exemption from federal and state income taxes), because some credit unions are becoming larger, offering more services, and acting more like banks. This critique focuses upon the NCUA’s recent “liberalization” of common bond requirements, particularly the allowance of locational bonds that permit some credit unions to emphasize geographic area “bonds” more like banking market areas. But CUNA replies that banks and “stock” thrifts (investor owned) vastly exceed credit unions in size and strength. Altogether “stock” banks and thrifts had roughly $7,500 billion assets in 2003, whereas credit ...in an era when large-scale bank and stock-thrift consolidation and merger activity is reducing competition among depository institutions, the survival of credit unions as a marketplace discipline...
- The Great Depression provoked a large part of modern thrift legislation in the United States, and much of the federal regulatory structure that supervises and insures most thrift institutions. (1) Savings banks (mostly MSBs) had been authorized in 17 states, and since 1982 could also obtain federal charters. Their deposit insurance came from the FDIC, FSLIC, or state insurance programs ( , Massachusetts). In 1982 almost all 448 savings banks were state chartered, and supervised by their respective states, plus the FDIC or Federal Home Loan Bank Board. But thereafter many stock savings banks were chartered by the Federal Home Loan Bank Board, its successor agency (the OTS), and some states. By 2017 there were 483 FDIC insured savings banks.
- Mutual savings banks spread throughout the industrial Northeast fairly rapidly in the 1820s–1830s. The Panic and Depression of 1837 depleted their ranks, but MSBs became more numerous and prospered during the 1840s–1850s. By 1860 deposits in about 200 MSBs were $150 million, whereas assets in the 1600 commercial banks totaled $1 billion. But savings banks operations were concentrated in the more industrial states, especially Massachusetts with 89 MSBs and $36 million deposits, and New York with 72 MSBs and $67 million deposits. In the agrarian Midwest and South, banking remained overwhelmingly commercial and farming oriented, and MSBs were relatively rare. In many areas state commercial banks were also smaller, less pretentious, and served some of the functions of savings banks. And savings and loan associations (or building societies) largely took over the remaining role for mutual savings banks in the rest of the country.
- More recently, however, much of the thrift industry recovered their financial health. Generally the “problem” institutions had either failed or recovered by the mid-1990s. But the consolidation movement that hit the U.S. banking industry since the mid-1980s continued throughout the full range of depository institutions. Commercial banks declined in numbers from 14,285 to 7,338 between 1985–2008 while bank assets grew from $2,350 billion to $11,806 billion in these 24 years. Savings banks and S & Ls declined from 3,905 to 1,265 between 1985–2008, but thrift assets (S & Ls, savings banks, and credit unions) grew modestly from $1,414 billion in 1985 to $2,591 billion in 2008. Substantial numbers of thrift institutions, and their assets, had been acquired by commercial banks in these years. Also significant was a disparity in FDIC insurance premium assessments for BIF institutions—as compared to SAIF insured S & Ls and savings banks, prior to the merger of the BIF and SAIF into the...banks
- BIF insurance premiums were raised substantially between 1989–1994 because of widespread commercial loan problems among larger banks, and BIF insurance reserves needed replenishment. But by 1995–1996, bank capital had been largely rebuilt for BIF insured institutions, and accordingly, BIF premium charges were lowered to minimal levels for soundly-rated commercial banks. For years, SAIF premiums were more expensive. This differential was a cost disadvantage for SAIF insured savings banks and S & Ls.
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Chapter VI Insurance Regulation 403 31 results (showing 5 best matches)
- Recent events have aided in increasing supervision of the insurance industry. Even before the market collapse of 2008, insurance companies were reorganizing and diversifying as FHCs, by acquiring or establishing banking and financial services affiliates under the FHC structure, including State Farm Group (State Farm Bank), MetLife (MetLife Bank NA), American International Group (AIG Federal Savings Bank), and Allstate Corp. (Allstate Bank), with total assets of $28 billion. Efficiencies have been achieved by maintaining banking affiliates as virtual banks accessed by customers through the Internet, ATMs, and mail. Significantly, these reorganizations open up the possibility of significant supervision of these conglomerates by the Federal Reserve as FHCs.
- A “turf war” over boundaries and diversification among commercial banks and thrift institutions raged since the early 1980s. When failures became widespread among banks and thrifts in the late 1980s, most states relaxed their restrictions on interstate banking. Later big banks won further
- In this context, many believed that bank-insurance interpenetration could only come incrementally. Recent OCC rulings attempted to widen bank powers and allow more insurance activities by banks. U.S. Supreme Court decisions like in 1995, where the court allowed banks to sell annuity insurance policies, and
- Why did some banks and BHCs want insurance underwriting or marketing authority and powers? Many banks feared consolidation, retrenchment, and computerization pressure, and believed that financial service operations could be leaner with fewer employees. Accordingly, some banks favored expansion into insurance as an offset growth channel, even though this came at the expense of insurance agents (and, to some extent, insurance companies). In addition, some banks saw economies of integration for banking, asset management, and customer services (including insurance). While most smaller banks would get little growth from insurance, a sizable number of large BHCs could make profitable mergers with insurance companies as financial service holding companies. Remember that 72 percent of U.S. bank deposits in 2003 were held by the largest 100 U.S. bank organizations; many of these were potential acquiring firms, on the lookout to buy insurance companies at good prices.
- Many insurance industry experts, however, saw less bank expansion potential into the insurance field. Most independent insurance agents, however, fear that many ordinary auto, home, life, and health care policies could be sold in bank lobbies. Over time, they worry, that traditional independent insurance agents could be marginalized and replaced by insurance policies sold in bank lobbies, or tied in with bank loans, title insurance, checking account, annuity sales, and mutual fund services offered by banks. For these reasons independent insurance agents (hundreds of thousands of them) resisted any Glass Steagall reforms that allow banks to enter freely and take over insurance marketing. From their viewpoint, such a banking takeover would be a “death sentence” for independent insurance agents—that only benefits less than a hundred large BHC organizations. Life insurance sales slowed in recent years, and banks were less suited for sophisticated business and estate planning... ...bank...
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Chapter VIII Controversies and Prospects 497 42 results (showing 5 best matches)
- Among the possible restructuring options were consolidation of most federal bank regulation activities (other than Federal Reserve monetary policy) into a new agency. This could be called the Federal Banking Commission (FBC) or a broadened OCC-FDIC. Crucial questions would be its leadership, responsiveness to different elements of the banking industry (multinational banks, regional banks, and independent banks), thrift institutions, and broader public interests. Some proposed reducing (or “weakening”) the Bank Holding Company Act’s regulation along with such a change, although this is controversial. Few seemed to favor including the NCUA in such a consolidation, at least initially.
- In this context, it should be emphasized that U.S. banking and financial market regulators and industry experts are becoming more aware, interested, and knowledgeable about banking and financial market regulation in other advanced industrial countries, especially Europe and Japan. In these other countries, banking, securities, and insurance regulation has some similar characteristics. Each nation has a Central Bank and Finance (Treasury) Ministry for monetary and fiscal policy. Banking market supervision and detailed regulation is either the central bank’s responsibility, or delegated to a banking commission or similar agency. Insurance might be regulated by the Finance ...independently. Merger activity is closely supervised, along with significant international bank branching in their territories. Exchange and credit control authority is commonly established, though not used often by moderate and conservative governments. Foreign exchange markets are supervised more carefully (with...
- Banking and financial institutions law is an evolution of compromises. The development of money and banking law, banking market regulation, thrift institutions, securities markets, insurance companies, pensions and Social Security funding was set forth in previous chapters. But a number of important issues continue to be controversial, and are being dealt with by the Executive Branch, Congress, and the regulatory agencies. While outcomes cannot be predicted with certainty, the issues and arguments can be summarized. This provides considerable insight into the challenges for banking and financial market regulation in the coming years.
- One of the toughest challenges for financial market regulators is the trend to wider financial conglomerates (banking, securities, and insurance), along with an increased number of multinational enterprises in these financial sectors. We’ve learned through many institutional failures ( . the 1991 collapse of the Bank of Credit and Commerce International) that good accountability, comprehensive reporting, reasonable transparency, and sufficient capital are essential for sound finance. Mergers across national boundaries makes this supervision more difficult, and multinational financial conglomerates even more so. Thus, stronger collaboration regimes (including “source of strength” doctrines) must be established among financial regulators (banking, securities, and insurance), but also across international boundaries. Thus, the Basle Concordat regime sponsored by the BIS to establish basic principles for responding to liquidity and insolvency problems in global banking could be
- Until recently each major field in the spectrum of U.S. financial institutions—commercial banking, thrift associations (MSBs, S & Ls, and credit unions), securities marketing firms, and insurance companies—was almost entirely specialized to itself. There was little diversification or cross-ownership between these financial industries, and not much ownership of significant financial enterprise (in any of these channels) by outside industrial companies. Each financial sector was supervised mainly by its own regulatory agency or agencies, usually sympathetic to industry needs, along with more general public and consumer interests. Within their respective channels, banks, thrifts, securities firms, and insurance companies performed their intermediation roles, served depositors and customers, and grew within the latitude allowed for their industry. (See Chart VIII-1 for Traditional Market Participation Among Financial Institutions.) Chartering policies, fiduciary responsibilities,...banking
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Chapter V Securities Market Regulation 351 31 results (showing 5 best matches)
- Underwriters support the initial distribution of new securities. They provide risk capital or “investment” banking resources for this purpose. Brand new companies or projects involving substantial uncertainty or risk must accept a significant discount, spread, or fee to compensate their underwriters, say 8–15 percent off the gross offering price. New issuers typically take a “best efforts” arrangement from the underwriters to sell whatever volume of securities investors will absorb, with a substantial commission to the underwriter. On the other hand, highly successful corporations with strong reputations obtain underwriting commitments for much smaller fees or commissions. Blue chip issuers negotiate or let bids for the lowest possible commission or issuing cost to market their securities. Thus, underwriting or investment banking involves a wide mixture of risk possibilities ...may go considerably beyond normal commercial banking for collateralized loan accounts. And yet, some...
- The major underwriters in the domestic U.S. securities market comprise leading dealer-broker organizations like Merrill-Lynch, which have excellent opportunities to float large blocks of securities to the public, along with a few important investment bankers that concentrate more directly on institutions. Regional underwriters and dealer-brokers may participate actively in selected issues, especially in their marketing areas. Large domestic commercial banks recently participated in this underwriting process, although restricted by Glass-Steagall Act limitations on securities distribution. (However, in 1987–1990 the bank regulatory agencies allowed some of the largest U.S. banks to underwrite commercial paper, securitized instruments, and even domestic bonds and stocks, provided that such underwriting was handled in separate affiliates, and in moderate amounts compared to other activities. ...In international banking, however, there were no Glass-Steagall restrictions, and there was...
- In commercial banking such questions are not so pressing, because borrowing liquidity on a loan basis is a more neutral, objective process. Some advice may flow in a good bank-client relationship, with mutual education and business gains. But the nature of investment banking is more entrepreneurial, like a quasi-partnership (at least for the period in which securities are being issued). Part of the legal difference in U.S. law flows from the securities-disclosure tradition built up by the SEC and 10b–5 responsibilities over the last generation, in contrast to more detached, arms-length creditor relationships in traditional commercial banking. For commercial banking the law creates a primary responsibility to depositors for safety and prudence in maintaining liquid funds on deposit, with equity profits going to bank managers who provide this service efficiently. In contrast, investment “bankers” or underwriters are really capital-raising deal makers, who place their capital at stake...
- Apart from the securities disclosure, registration, and anti-manipulation disciplines described previously for underwriters, dealers and brokers, there is little specific regulation of investment banking under U.S. law. NASD membership and FINRA supervision apply, but this adds little further regulation to underwriting or investment banking. Thus, there are no comparable entry or chartering requirements, only modest capital or solvency regulation, and no merger, holding company, or branching restrictions for domestic investment banks, in contrast to the extensive supervision of virtually every aspect of the corporate and transactional life of a commercial bank. ( ...difference in treatment is that investment banking or underwriting outlays are viewed as a specialized type of risk-taking entrepreneurship. Although often highly profitable, the underwriting of securities is not considered generally a normal, prudent investment for public deposits of liquidity. Commercial bankers are...
- The recent crisis of 2007–2013 has prompted the question, who should be supervising big investment banks? The Federal Reserve, the SEC, or the U.S. Treasury (and its OCC)? Or all of them? These issues provoked extended controversy. Some experts now believe that combining investment banking with commercial banks never made sense. It was inherently too risky. So, they reasoned, we should re-enact Glass-Steagall separation. The Dodd-Frank Act goes only so far as to restrict, but not eliminate, “proprietary trading” in securities by banks, subject to a range of exceptions included in implementing rules promulgated in December 2013.
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Preface iii 5 results
- Major changes have occurred. Broader rivalry developed over the last generation among banks, thrift institutions, securities firms, mutual funds, insurance companies, pension funds, and various retirement and investment accounts. Considerable deregulation was achieved; yet the next steps remain controversial. Unfortunately, a costly wave of U.S. bank and thrift failures came in the late 1980s and early 1990s. This led to tougher laws in 1989s and 1991, and substantial bailout and restructuring efforts, especially for savings and loan associations and savings banks. But, as economic conditions stabilized and bank margins improved, capital was replenished for most U.S. institutions since the early 1990s. Renewed confidence with sound oversight seemed to be re-established, but renewed strains have emerged.
- Sadly, however, lax surveillance reappeared in U.S. mortgage finance, global securitization, and off-balance sheet activities. This brought an even bigger wave of bank losses in 2008–2009. Another round of bank failures in the U.S. and Europe combined with several trillion dollars of contaminated assets. Awkward uncertainties hit the largest U.S. and European banking and securities firms. Many of the biggest institutions needed multi-billion dollar bailouts, guarantees, and/or loan support. Over-leveraging, over-confidence, and gaps in supervision were to blame. Once again, regulatory agencies and financial markets were strained. But lessons from the Great Depression, the 1970s, 1980s, and the 1990s should be helpful as we emerge from the latest crisis.
- This book is intended for lawyers, law students, economists, bankers, and business people seeking to understand recent developments in banking and financial institutions law and policy.
- This book explains the economic, historical, and legal background for banking and financial intermediaries. Law and policy-makers tried to compromise conflicting interests, with a view toward improved competition and overall performance.
- An extensive body of literature and law exists in each area summarized by this book. But hardly any legal writing properly integrates these developments for banking and financial intermediaries as a whole. This book meets that need, and has been heavily revised for recent developments.
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Outline 21 results (showing 5 best matches)
List of Tables and Charts xv 7 results (showing 5 best matches)
Title Page 1 result
- Three kinds of managers are used by private pension funds. (1) A large number of plans are “insured” and managed by insurance companies, with up to one-fourth of the private pension assets, including many smaller plans. State insurance regulation applies to this sector, with restrictions upon assets, bonds, mortgages, equities, and loans. (2) Banks manage a large chunk of the majority of other private pension trust funds, and handle many of the bigger plans. The national and state banking laws, together with the state law of trusts, provide guidelines and prudential regulation for investment management. (3) Many remaining private pension funds involve mutual funds, or perhaps union collective bargaining trusteeship arrangements, where there was sometimes a lack of guidelines or investment standards for pension fund managers. Unions often attracted the greatest publicity as to malpractices, misuse of funds, and breach of fiduciary duties. But mutual fund and securities account misuse...
- terminated. Apart from these tax qualification requirements, the only other significant law regulating pensions was the law of trusts in each state for funds taking the form of legal trusts, and state insurance law for insurance contract plans developed by insurance companies. Note that commercial banks and trust companies commonly serve as trustees for pension plan trust funds, and banking law indirectly affects their activity, too.
- Generally speaking, ERISA provides that pension fund managers, trustees, or officials with control over such funds must be bonded. Because such people are all liable to participants. beneficiaries, and their funds for breach of fiduciary duty, and may involve their company or organization in expensive liabilities, this would be normal prudence in limiting the risk of such loss. Specific exemptions, however, apply to bonding for insurance company, bank, and
- , “pay as you go”, and only a minority of plans collected serious reserves in advance for potential obligations. With respect to industries, railroads had the strongest pensions, with roughly 85 percent of their employees covered, but pension plans were also common among utilities, and the steel, oil, chemical, rubber, machinery, and banking industries. By this time pensions were established for the military services, the federal civil service, some state and local government workers, many schoolteachers and university faculties, and some of the clergy. The idea of pensions was spreading rapidly for “good” employers with public approval. Company stock-option plans were also common, and served some retirement purposes, though mainly for higher salaried executives.
- ...supplementary retirement options is substantial. These accounts broaden the access to retirement savings among financial intermediaries, and allow more competition for these funds. Banks, MSBs, savings and loans, insurance companies, mutual funds, and money market funds compete for these funds, along with many established pension plans (through SRAs and related options), and securities brokerage firms offer “self-directed” Keogh investment accounts for stocks, bonds and other securities. More savings may result from Keogh, IRA, SRA and related accounts, although funds in this category may have less liquidity, and are often subject to financial institution management and service fees. The widening of access to these tax-sheltered savings and investments may be influential politically. This may prove to be a popular, broadly desired tax concession for many families. Conceivably, the taste for “individualized” pension plans could alter group pension and benefit plans for employers,...
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Index 531 68 results (showing 5 best matches)
Table of Cases xiii 6 results (showing 5 best matches)
Center Title 1 result
- Publication Date: July 18th, 2019
- ISBN: 9781684674329
- Subject: Banking/Financial Institutions
- Series: Nutshells
- Type: Overviews
- Description: Authoritative coverage provides a foundation for understanding core concepts and recent developments in banking and financial institutions. This Nutshell title covers subjects such as the history and structure of the financial services industry and its regulators, interaction of law with monetary and economic policy, increased competition, bank and thrift failures, large-scale bailouts, and deregulation and restructuring efforts. Unresolved challenges include budget stimulus, treatment of deficits, and new questions about the appropriate role of supervision by regulators.