This year marks the 20th anniversary of the Financial Services Modernization Act (FSMA), also known as the Gramm–Leach–Bliley Act, signed into law in President Clinton's second term. The goal of this legislation was to improve the efficiency and competitiveness of the financial services industry by removing legal barriers between commercial and investment banking. In reality, it laid the groundwork for an oligopolistic universal banking industry, in which a small number of institutions provide a wide variety of services across the commercial and investment banking spectrum.
Once implemented, the FSMA led to a massive consolidation of financial institutions. Today, according to FDIC data, more than 50 percent of all deposits in the United States reside with the four largest bank holding companies, and these are the same companies that sit atop the league tables in merger and acquisition (M&A) advisory, loans, bonds, and equity offerings.
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