ABSTRACT
A coherent regulatory structure for the U.S. finandal system evolved out of the debris of losses and failures associated with the Great Depression in the 1930s. It was shaped by a widespread perception that finandal institutions had failed to meet their fiduciary responsibilities. Many believed that conflicts of interest and the concentration of finandal resources resulting from the involvement of banks in securities activities were at the root of the problem.1 Revelations of excessive and imprudent loans by banks to their securities affiliates, unwise risk-taking by affiliates, and other questionable financial practices, as weIl as loss of confidence by bank depositors, contributed to the c1imate in Congress that resulted in reinstatement of the separation of commercial and investment banking and the creation of new institutions and regulatory agencies.2
