Don't Split Them UpIn a report on Monday considering alternatives to the breakup of the nation's largest banks, Mosby pointed out that "JPMorgan Chase has been active in broker/dealer activities throughout the evolution of the U.S. financial system," and that the company's structure "hasn't seemed to push this financial institution in harm's way." Bear in mind that JPMorgan Chase, along with several other large banks that received federal bailout funds in October 2008 through the Troubled Assets Relief Program, or TARP, was specifically directed by then Treasury Secretary Henry Paulson to accept the money. Or else. JPMorgan repaid TARP in June 2009. Mosby neatly summed up the argument against bringing back Glass-Steagall: "During the last financial crisis, the escape hatch was to consolidate the stressed broker/dealers into the safety of the diversified banks. By nature, independent broker/dealers require less capital, and the use of leverage is a fine-edged sword that can push these firms to the edge."
"On the other hand, we believe that by incorporating market making and investment banking into the overall commercial banking relationships of traditional banks, the need to generate these incremental revenues through riskier activities is minimized," Mosby wrote. Mosby does agree with the stipulation under the Dodd-Frank Wall Street Reform and Consumer Protection Act that banks should have their "broker/dealer activities