For almost 10 years, we watched Milburn Drysdale, a gray-suited, money-hungry banker, do whatever was needed to keep his richest depositors, the Clampetts, in Beverly Hills and firmly deposited in his bank. He often had to humiliate himself just to keep their business. And sometimes he even bent bank policy a bit. (Sometimes more than a bit.)
That was back when the banking industry was fairly stodgy, operating on slim profit margins and an entrenched policy of conservative behavior. (Not that there weren’t occasional rule-benders like our Milburn.)
For many years, banking was mostly a sleepy enterprise, with deals being done that in no way rivaled the excitement and risk of Wall Street (investment banking).
Then Glass-Steagall crumbled. (The Glass-Steagall Act of 1933 had separated investment banking and commercial banking activities to try to prevent the great crash of 1929 from ever happening again, by lowering risk for investors through protective barriers between different types of financial institutions.)
The crumbling actually began earlier, but sped up in the mid-1990s as bank holding companies began acquiring investment banks. Continue reading