Class Twenty-Two: November 5, 2014

We will begin this section of the class by discussing the current structure of the US banking sector and its place within the US financial services sector and by noting the different sizes and different business models of the current large complex financial conglomerate as they exist today. Once we have a firm grounding in the current business reality and using history as our guide, we will discuss the development of the holding company structure in the US which has led to a need for a supervisory focus on the relationships among the holding company, the insured depository institution, and the non-banking affiliates. (See A Structural View of U.S. Bank Holding Companies.) We will then cover limits on transfers of cash and assets from the insured bank to affiliated parties (Sections 23A and 23B of the Federal Reserve Act), the source of strength doctrine and cross-guarantees. Here the key readings are Saule Omarova’s article and Paul Lee’s article, both of which you should read quickly. We will compare the US organizational structure to the traditional continental European model where commercial banks are universal and there is no holding company. In preparation for this class, you may find it helpful to review Elizabeth Brown’s article assigned for Class Nine in Week Three. Readings: Avraham, et al., A Structural View of U.S. Bank Holding Companies, FRBNY Economic Policy Review, July 2012 Saule Omarova, From Gramm-Leach-Bliley to Dodd-Frank: The Unfulfilled Promise of Section 23A of the Federal Reserve Act, 89 N.C. L.Rev. 102 (2011) Paul L. Lee, The Source-of-Strength Doctrine: Revered and Revisited – Part II, 129 Banking Law Journal 867 (2012)