"During the 1920s, the institution then known as National City Bank opened stores around the country to encourage the burgeoning middle class to invest in stocks and bonds. With little money down 10 percent of the cost of a trade was all an investor needed to buy shares investors poured into the stock market."
"Before the crash, industry practice allowed National City not only to underwrite securities but also to employ a sales army to peddle them to depositors." One response was passage of "the Glass-Steagall Act, separating activities of commercial banks (which offered plain old savings accounts and loans) from those of investment firms." "Although thousands of smaller banks failed, government policies to prop up the banking sector helped National City and other major banks weather the Depression."
During the 90's bank crisis from lending to Latin America, the company (then known as Citigroup) was saved by weakened capital and accounting rules and by low interest rates created by the FED.
It and other banks then used their clout to get Glass Steagall repealed. "By liberating our financial companies from an antiquated regulatory structure, this legislation will unleash the creativity of our industry and insure our global competitiveness," Mr. Sanford I. Weill and Mr. John S. Reed, Citigroup's co-chairmen and co-chief executives, said in a statement after repeal. "As a result, all Americans investors, savers, insureds will be better served."
We all know what happened then. The bank's health remains precarious and largely dependent on the government guarantee. But it is still resisting reform and opposing moves to split up the too-big-to-fail banks.
