Evidence on the Risk of Losses

Abstract

In Investment Company Institute v. Camp¹ the Supreme Court ruled that the Glass-Steagall Act foreclosed commercial banks from offering commingled investment accounts. The Court explained that the Act ‘reflected a determination that policies of competition, convenience, or expertise which might otherwise support the entry of commercial banks into the investment banking business were outweighed by the “hazards” and “financial dangers” that arose when commercial banks engage in the activities proscribed by the Act’.² Congress, the Court said, ‘was concerned that commercial banks … had both aggravated and been damaged by stock market decline partly because of their direct and indirect involvement in the trading and ownership of speculative securities’.³ Furthermore, the Court believed that ‘[t]he failure of the Bank of United States in 1930 was widely attributed to that bank’s activities with respect to its numerous securities affiliates’.⁴