The Financial Services Revolution

"The riskiness of the overall bank cannot be determined by simply summing the risks of its individual activities. Such a sum will overstate the riskiness of all the activities combined."

"That the term exists at all owes more to a desire by popular commentators to popularize and homogenize finance than to any real economic distinction."

"Once these building blocks are defined, the cash flows on virtually any derivatives transaction can be viewed as the net cash flows on a portfolio comprised of some combination of these building blocks."

"Derivatives allow firms to expand their primary lines of business or diversify into new product and service lines."

"The pool issues its own securities to investors. The price that investors pay for the securities is then paid to the person who transferred the loans to the pool, minus expenses."

"Securitization may be a better intermediation process than the traditional processes. It may be an innovation that better utilizes markets, institutions, and new technologies, especially in an unstable economic environment."

"It is not clear whether participants as a group fundamentally are comfortable with significant equity exposure, and participant behavior has not been tested by a significant bear market."

"Four elements must all be present for educational information disseminated by a plan sponsor or financial services provider to a plan participant to constitute investment advice under ERISA."

"The empirical research demonstrating the reliable extraordinary returns from shareholder activism also gave more credibility to shareholder activism as an investment strategy, and a very competitive one."

"Ultimately, all institutional investors, including mutual fund managers, should consider share ownership rights a valuable asset that can and should be exercised to preserve and enhance value."

"The expanded use of various electronic media, however, also has a dark side. It will become more difficult to protect investors because swindlers can now reach millions of potential victims quickly and inexpensively."

"The centerpiece of an SEC report on derivatives trading by funds is a proposal to create a simple numerical measure of riskiness for mutual funds."

"The most extreme argument, that derivatives and other highly complex instruments should only be utilized by experts and quarantined from individual investors entirely, is shortsighted and ineffective."

"A leading offshore financial products is the offshore fund. As more firms have begun to exploit the advantages of offshore financial centers, the offshore fund industry has grown at a tremendous pace."

"The parallel banking system's success in exploiting regulatory imbalances and public supports highlights the need for a new approach to financial regulation."

"Continued delays in developing a regulatory structure for U.S. financial institutions that enables them to compete in the markets of the year 2000 are inevitable."

"As opposed to disclosure-based regulations, which depend upon consumers to absorb and respond rationally to information statements, portfolio-shaping rules are generally the product of government intervention."