Page "Glass–Steagall Act" Paragraph 168

Starting in the late 1980s, John H. Boyd, a staff member of the Federal Reserve Bank of Minneapolis, consistently questioned the value of size and product diversification in banking.

In 1999, as Congress was considering legislation that became the GLBA, he published an essay arguing that the “ moral hazard ” created by deposit insurance, too big to fail considerations, and other governmental support for banking should be resolved before commercial banking firms could be given “ universal banking ” powers.

Although Boyd ’ s 1999 essay was directed at “ universal banking ” that permitted commercial banks to own equity interests in non-financial firms ( i. e., “ commercial firms ”), the essay was interpreted more broadly to mean that “ expanding bank powers, by, for example, allowing nonbank firms to affiliate with banks, prior to undertaking reforms limiting TBTF-like coverage for uninsured bank creditors is putting the ‘ cart before the horse .’”