Private equity, at its most basic, is equity, i.e. shares representing possession of, or an interest in, an entity that are not publicly listed or traded. Private equity is a source of investment capital that comes from high net worth individuals and firms. These investors buy shares of private companies-or gain control of public companies with the intention of taking them private and eventually delisting them from public stock exchanges. Large institutional investors dominate the private collateral world, including pension funds and large private equity companies funded by a combined group of accredited investors.
Senator Alfonse D’Amato and Representative Richard Baker have introduced virtually identical expenses in the Senate and House that could go much further than the Leach strategy. Beneath the D’Amato/Baker approach, banking institutions and other firms would affiliate under an FSHC. Unlike the Leach proposal, however, these FSHCs would not have capital requirements, nor would they be subject to Federal Reserve rules.
Bank affiliates would continue steadily to have capital requirements, and functional regulation would connect with the nonbank and bank or investment company affiliate marketers of the FSHCs. As with the Leach proposal, strict firewalls would be positioned between insured depository securities and institutions firms within the FSHC framework, and current Federal Reserve regulations associated with transactions between affiliates, insider lending and anti-tying would stay in effect. A fresh federal agency, the National Financial Services Committee, would be formed to determine uniform principles and standards for the examination and supervision of financial services providers.
- 8 years ago from Phoenix, Arizona
- Other securities
- Fees you pay right to your IRA or Keogh custodian
- ► Apr 23 (2)
Officials from the Administration and the federal financial regulatory companies would take a seat on this committee. The Clinton Administration has outlined a plan to repeal Glass-Steagall that falls somewhere within the Leach and D’Amato/Baker proposals. The Administration would allow banks and thrifts to affiliate with any financial entity, including insurance firms, but not with commercial firms. Unlike the other two proposals, affiliations between banking institutions and financial firms could happen at the bank or the holding company level-the structure would be determined by individual companies. Whatever the framework, the Clinton plan requires firewalls between bank or investment company and financial affiliate marketers to protect the deposit insurance account.
As with the other programs, banking and other affiliates would be at the mercy of functional regulation. The Federal Reserve would maintain its specialist to impose capital requirements on bank or investment company holding companies. As in the D’Amato/Baker costs, a federal government council would be shaped to oversee these new FSHCs. What’s the likely final result? Most observers think that a improved version of the Leach costs gets the best opportunity for congressional passage and presidential approval. The only foreseeable concern that could severely dampen the bill’s chances is bank or investment company insurance powers; bank trade groupings have vowed they’ll fight to eliminate the whole bill if amendments rolling back banks’ current insurance powers are attached.
Although many applaud the D’Amato/Baker approach, others say america is not yet ready for as radical a change as the merger of bank and commerce, though it could happen some day. Thomas A. Pollmann provided research assistance. The author wish to thank Patricia A. Marshall of the Bank’s Legal Department for helpful feedback. 1. See Fein (1993) for an overview of banking institutions’ current securities capabilities. 2. See Greenspan (1993) for a detailed evaluation of permitted Section 20 activities.
3. The U.S. Supreme Court has upheld, for example, regulatory rulings regarding bank or investment company holding companies acting as investment advisers for open-end and shut end mutual funds and providing discount brokerage services. 4. This prohibition will not extend to convey nonmember banks. FDIC regulations allow state nonmember banking institutions to sponsor and underwrite shared money through “bona fide” subsidiaries. Furthermore, bank holding companies are allowed to underwrite and send out closed-end mutual funds. 5. Japan was pressured to look at U.S.-like bank laws and regulations after WWII.
Japanese banks, like U.S. 6. See Clark (1994) for an analysis of the huge benefits and costs of interstate branching. 7. Most bank or investment company cost studies have found that scale economies, while they can be found in banking, are worn out at low degrees of output relatively. Studies of economies of scope are fewer, and the full total results more blended. The studies’ acknowledged problems are the difficulty in defining and measuring inputs and outputs and having less data on the joint production of bank and nonbank products.