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Beginning in the mid ‘70s,
multiple companies have been putting great effort into drive the financial
industry in order to change the Glass Steagall Act of 1933. The act prohibits
companies from conducting banking and activities dealing with investment and
insurance. In ‘99, those efforts culminated with the help of the Gramm Leach
Bliley Act, which allowed banks and financial services holding companies to be
created and operate under a single corporate structure. Recently, this lead to
a dominant industry trend: companies trying to integrate manufacturing with the
delivery of financial services to consumers and businesses. Such companies were
Citigroup, Salomon Smith Barney and Travelers Insurance; and Citibank.

It was difficult for
Citigroup to make the model work, so those that supported the concept helped to
maintain the right model. Come to find out, Citi wasn’t doing it the right way.
Later, the mess with the subprime mortgages arose. This resulted in the
implosion of Bear Stearns, credit crisis with AIG and Lehman Brothers failure.
The financial services industry had a great fall and it seemed that no one
could put them together again. Gramm Leach Bliley was unable to implement the
regulation of new hybrid products the entities were now able to make, own, pack
and sell -- such products include black box CDOs and credit default swaps,
which fell through the functional regulation’s cracks.

After all this, it was time
for something new -- another regulation to replace Gramm Leach Bliley. There’s
really no true prediction of what the new regulation will bring, but hopefully
it will be the silver lining in the clouds. There are various proposals being
made on the new regulation by the Treasury, industry lead and Congress.

Some predict that once a new
regulation is in effect, that banks (larger financial services holding
companies) will begin to take over national and regional banks. Then the
regional banks are likely to be combined in order to create smaller holding
companies. It is also predicted that the community banks would be absorbed to a
certain extent, but they would still have the option to stay independent in
order to create the small-town feel customers like.

If anything, community banks
would benefit the most from the new regulation -- their performance would
exceed others for at least a decade by providing a large variety of services,
including financial planning. Community banks would also keep to their roots of
being the main financial centers within their communities.

Robin Trehan, is associted
with private equity group of Credit Capital Funding. More information on www.LatestBusinessReport.com