Why are there so many different types of financial companies?
The reasons largely arise from historical concerns about dangers posed by financial institutions that are "too big" and the potential for risk, abuse of power, and excessive influence on the American economy and consumer choice.
There are numerous Federal and state laws that have significantly restricted what different types of financial companies are able to do.
Some of the laws date back to Chief Justice Hughes’s conclusions in the Armstrong Investigation of 1906 that insurance businesses should be kept separate and apart from other activities. Many of the other laws, such as the prohibition against combining banking and most securities activities, and what had been tight restrictions on "interstate banking" arose from legislative actions in the aftermath of the Stock Market Crash of 1929.
While the laws are rapidly changing, there are numerous barriers still in place that restrict what various players in the financial markets may do, directly or indirectly.
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