Banks May Opt Back to Glass-Steagall
New York (
) -- Banks will voluntarily reinstitute Glass-Steagall practices in response to market and capital pressures, says Kenneth Moelis, CEO of New York-based investment bank
Moelis & Company
.
"I don't think they will reinstitute Glass-Steagall formally, but
the transitions in the regulatory environment, Basel III and debate over banker bonuses in Europe
will lead to protracted pressure that will lead to voluntary Glass-Steagall separation," Moelis said at
The Deal Economy
conference at The New York Stock Exchange on Friday.
Much of the Glass-Steagall Act was removed in 1999, including the separation that previously existed between Wall Street investment banks, insurance companies and depository banks. Legislative changes also allowed firms to merge and trade mortgage-backed securities.
For instance, with the repeal
Citigroup
(C) - Get Report
was able to own Citibank,
Smith Barney
,
Primerica
(PRI) - Get Report
and
Travelers
(TRV) - Get Report
.
Moelis also remarked that investment banks had morphed from into financial conglomerates as a result of mergers over the last 30 years.
"Investment banks used to look a lot like law firms, and I'm very jealous that the law firms stayed the way they are," Moelis said. "Banking was about the clients and about the bankers. It wasn't about corporatocracy. It was about being a trusted advisor."
--Written by Maria Woehr in New York.
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