PROCESS OF BANKING DEREGULATION (accomplished by professional lobbyists) enabled mass bank mergers and legalized formerly prohibited financial ativities
1933 – Separation of commercial and investment banking (Glass-Steagall Act) Only 10% of commercial bank income could derive from securities
1965 – Separation of banking and insurance industries; banks not allowed to underwrite insurance which would risk depositors’ funds (Bank Holding Company Act)
Clinton Administration 1993-2001
1997 – Allowed banks in different states to merge into nationwide branch networks. But state law continued to control intrastate branching (Riegel-Neal Act, repealed Glass-Steagall)
1999 – Repealed the remaining portions of Glass Steagall Act and Bank Holding Company Act; commercial and investment banking merged resulted in banks being allowed to use depositor funds to purchase derivative instruments (Gramm-Leach-Bliley Act)
HOW US BANKS DEVELOPED
Before 1995 banks could only operate inside one state. That meant that there were thousands of locally owned banks across the country. In rural areas a county usually had only one local family owned bank. In rural states the largest city might have several.
Before WW2 the BIGGEST BANKS were in NY, PA, and NJ, the RICHEST STATES because of the large industries located there. East coast banks became very large and powerful. The families that owned these banks had in many cases been owners since the early 19th century. Investment brokerages had the same profile and evolved the same way.
America was very insular without experience or contacts overseas. In the mid 19th century a handful of small scale German Jewish bankers settled in NYC as merchant banks. They specialized in financing infrastructure development such as railroads and commercial contracts between American and European companies. In the 20th century they ventured cautiously into underwriting and issuing commercial bonds on a limited basis mainly in NYC.
The largest city in the world was London, capital of the greatest empire in the world spanning six continents. The British commercial sphere was served by an exceptionally stable and conservative banking system that was the envy of Europe.
The Rothschilds had developed an influential niche role in London which had the largest financial market in the world. They also owned family held firms in Frankfurt, Vienna, Paris and Naples established during the Napoleonic wars. Prior to that, the Rothschilds were financially insignificant living in a Frankfurt ghetto.
The Rothschild group was a multi national merchant bank which provided commercial loans financed by by investors and issued bonds for sovereign governments, i.e. they sold bonds to the public to raise funds, profited from fees, and seldom lent their own money. Interest on the bonds was paid by the commercial investment. They specialized in projects backed by sovereign governments that were reliable partners.
As a result from following a limited but successful business model, they earned a reputation for honesty and commercial skill which they used to benefit the Jewish community throughout Europe.
They never tried to enter the retail banking market, nor did they provide public brokerage or trust services prior to WW1. They were a private bank with a limited number of exclusive private clients.
Their specialty was to provide capital for new industrial and infrastructure ventures through private bond issues which were recognized as excellent investments. They sometimes issued sovereign bonds for small nations. They made private unsecuritized loans to members of royal families knowing that ultimately those loans would be repaid. This resulted in private relationships with influential people of vast wealth. This is how they became titled and could assimilate into the upper class in an era when this was nearly impossible for Jews to achieve.
The Rothschild group never controlled either the British or American banking system. They never opened a branch in US but worked in partnership with the small German-Jewish owned merchant banks in NYC which acted as their agents when needed. They were not intermarried with them because they were not important enough to marry with.
In the pre-WW2 cultural climate US banks did not put Jews on the board of directors or hire them as employees. The opposite was true in Pre-WW! Germany and Austria but this stopped during the events of the 1930’s.