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Technological and Regulatory Forces in the Developing Fusion of Financial-Services Competition


  • George G. Kaufmann,

    Everett D. Reese Professor of Banking and Monetary Economics
    1. Loyola University of Chicago
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    • The author is Everett D. Reese Professor of Banking and Monetary Economics, The Ohio State University, and Research Associate, National Bureau of Economic Research. For helpful comments on an earlier draft, the author wishes to thank Richard C. Aspinwall, George G. Kaufman, Edward J. McCarthy, Benson Hart, James Moser, Eli Shapiro, and Richard F. Syron Opinions expressed are those of the author and do not represent those of the NBER.


As they reorient work flows, financial firms are simultaneously restructuring their organizations to lower net burdens from government regulation. Alternative state and federal regulatory and legislative bodies compete vigorously for the regulatory business of developing institutional hybrids. Evolution of Federal Reserve policy toward “non-bank banks” exemplifies the process.

Product lines of traditionally heterogeneous financial institutions are rapidly fusing into a homogeneous blend. Institutions and market structures are reshaping themselves to lower the cost of serving customer demand for financial services. This paper contends that contemporary adaptations exploit scope economies rooted in technological change and deposit-insurance subsidies to innovative forms of risk-bearing.

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