Financial markets in transition; or, the decline of commercial banking

The 1980s was the most revolutionary decade in U.S. financial markets since the Great Depression. The thrift industry collapsed, necessitating a massive government bailout; commercial banks suffered an unprecedented loss of market share; households sharply reduced their direct participation in securities markets; pension funds and other institutional investors became financial powerhouses, and for the first time took an active role in the governance of corporations; trading in foreign securities soared to new heights; and there was an explosive growth in derivative markets, both on and off regulated exchanges. These changes, moreover, are just the beginning of a process that will eventually result in an entirely new landscape for the financial service industry. However, precisely what kind of financial structure we will have in the future is still not clear.