Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

To reestablish profitability in the 1990s America’s high street banks underwent spectacular consolidation. The top ten banks increased their share of total assets from 10 to 50 percent between 1990 and 2000. In addition they looked for a new business model.36 Rather than thinking of themselves as maintaining lifelong relationships with clients and their communities, they repurposed themselves as service providers for a fee. They had always originated mortgages but had generally sold them to the GSEs. Given the pressure that they were now under, the mortgage market, with its multiple layers of origination, securitization, selling and servicing, seemed like a natural bridge between their familiar high street banking business and their aspirations to high finance. But to engage in that full range of activities they needed regulatory relief. The New Deal–era regulations that separated retail from investment banking had to fall. The Clinton Treasury, first under Rubin and then under Larry Summers, gave them what they needed. In 1999 the last remnants of 1930s banking regulations were swept aside.