Wall Street Lived Large with Leverage

What does housing have to do with Wall Street? Traditionally, not much. For decades, regulations separated commercial banking from investment banking, and the investment banks weren’t in the mortgage business. It was MBSs that brought Wall Street to Main Street.

Commercial Banks, Investment Banks—What’s the Difference?

In 1933, the Glass-Steagall Act separated commercial banking and investment banking. (That law was reversed in 1999 with the passage of the Gramm-Leach-Bliley Act.) The two types of banking businesses had been separated due to stock-market abuses in the 1920s and the effects they had on commercial banking.
A commercial bank takes deposits and makes loans (it also “buys” money to lend, ...

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