Over the course of the last thirty-five years the nature of commercial and investment banking has changed in dramatic ways.  From the days of regulated liability cost (who remembers the pass book savings account with its 4% rate), to a shifting of pricing that resulted in disintermediation and the spawning of new markets like money market funds.  Thirty-five years ago the market was littered with small investment banking firms and brokerage firms that consisted of the names of the senior founders.  Firms like Kidder Peabody, EF Hutton, Lehman Brothers, Drexel Burnham Lambert were the places fortunes were made based on trading and taking risk.  Since then time has passed and those small firms were gobbled up by larger and larger financial institutions that were dominated by commercial banks.  The landscape changed over time so that today a few very large banks control a vast amount of the nations deposits and market trading activity.  The events of 2007 to 2009 brought to light the risk of this concentration in financial activity, and just how inter-connected the system has become.  In this new paradigm the financial market proved to be fragile and so after thirty-five years of deregulation we are now seeing a return of re-regulation.  This was all highlighted this week with the barrage of headlines discussing one issue, “The Volcker Rule.”

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