America's Banking System: The Origins and Future of the Current Crisis

This Article explains why contraction of commercial banking—as defined, organized, and conducted under federal supervision since the 1930s—is inevitable over time. We show how technological innovation and improvements in the primary and secondary trading markets for financial products have led to an irreversible decline in the demand for the services commercial banks are permitted to offer. We then show why the Bush Administration's reform proposals, although dramatic, far-reaching, and, in certain important respects highly constructive, ultimately will not solve the bank failure problem resulting from these economic trends. We also explain what further changes must be made to correct the now-endemic problems that plague the U.S. banking industry.