Banking and Insurance—Should Ever the Twain Meet?

I. Introduction II. Evolution of Banking in the United States ... A. Banking Prior to the Civil War ... 1. From the Revolutionary War to 1836 ... 2. The State Free Banking System, 1837 to 1864 ... B. The National Free Banking System, 1864 to 1933 ... 1. Prior to 1913 ... 2. After 1913 III. Regulation of Banking ... A. The Glass-Steagall Act and the FDIC ... B. Policy Goals of Federal Regulation ... 1. The Broad Goals ... 2. General Constraints on Federal Banking Policy … C. The Policy Implementing Tools (Regulatory Mechanisms) ... 1. Entry Restrictions ... 2. Capitalization Requirements ... 3. Limitation of and Prohibition against Specific Activities ... 4. Restrictions on Affiliations and Geographic Expansion ... 5. Lending and Borrowing Limitations IV. Regulation of the Insurance Industry ... A. The Nature of Regulation ... B. Items of Regulation ... 1. Entry and Capital Requirements ... 2. Reserves ... a. Property and Liability Insurance ... b. Life Insurance ... 3. Examination, Valuation of Assets and Liabilities, and Investments ... 4. Rate Making ... C. Insurance Holding Companies V. Pressures on Banks to Expand Their Activities ... A. The Changes in the Financial Services Industry ... B. The Banking Response ... 1. Bank Holding Companies ... 2. Nonbank Banks VI. Regulatory Prohibitions ... A. The Bank Holding Company Act ... B. Tiptoeing through the Tulips of Restraints ... C. Congressional Activity and Lack Thereof VII. Summary and Conclusion ... A. In General ... B. The Arguments for Deregulation ... 1. The Capital Mobility Problem ... 2. Retention of the Wall—The Insulation Device ... C. Other Matters ... 1. Subtle Anti-Competitive Issues ... 2. The Case against Insurance Integration ... 3. The 1991 Treasury Department Deregulation Proposal VIII. Addendum