THE BANKING TIME BOMB!!!
just when you think the fed is finally doing something right with the introduction of a recue fund, they shoot themselves by approving goldman sachs and morgan stanley to become retail banks. i think it is a bad bad idea to merge these two types of business together.
a retail bank caters to the general public, a bank where average joes like myself deposit our paychecks, keep our savings for rainy days and have a checking account to pay for our expenses. a place where we go for small loans to pay for our homes, credit cards spending and short term personal usage. investment banks on the other hand are meant for customers with excess funds to invest, money they can afford to lose without having to jeopardize their daily living. if you put the two together, it will be difficult for the customers to differentiate between saving and investing. this will lead to their financial health been highly correlated to the market, a no no situation to be in. in my opinion, investment banks and retail banks should always be separated so that no bank is deemed too big to fail and the investment banks which are more risky in nature can be better regulated.
so it is a bad idea for bank of america to buy over merrill lynch and a bad idea for goldman sachs and morgan stanley to collect deposits from the general public. although this might help in the short term with the liduidity crunch but in the long term we will all pay if we fail to segregate them clearly.
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