The Trading Money Center New York bankers did a brilliant sales job on policymakers, central bankers, and economists that the way to stabilize the world economy was to securitize everything. This combined with what they called the “Originate and Distribute Modelâ€Â would lead to the promised-land in finance.  Indeed, financial intermediation has changed dramatically over the last two decades as banks have changed the historical model of banking. The new model adapted by banks has really departed from the long-established relationship model where banks channeled funds between lenders and borrowers to build the economy. In today’s Wild West banking, an important change in the way banks provide credit to corporations has altered everything. Banks have replaced the traditional the Originate-to-Hold Model where they historically originated loans and kept them on their balance sheets until maturity. This required knowing your client and indeed was what I call Relationship Banking. Over time, however, banks began increasingly to distribute the loans they originated giving birth to a more Transactional Bankingestablishment known as the Originate-to-Distribute Model. With this change, banks limited the growth of their balance sheets but maintained a key role in the origination of corporate loans, and in the process contributed to the growth of nonbank financial intermediaries. Hence, everything became the Securitization Model that truly has inspired then Wild West style banking of Transactional Banking that has led to trading for profit.
The bankers have sold this panacea of a new world financial order to Washington and with this vision Glass Steagall was repealed opening the gates to financial hell. In 2003, Allan Greenspan even made the comment “Although the benefits and costs of derivatives remain the subject of spirited debate, the performance of the economy and the financial system in recent years suggests that those benefits have materially exceeded the costs.â€Â Clearly, Greenspan became a believer and supported the repeal of Glass Steagall under Bill Clinton.
