Commercial banking, investment banking, and insurance companies are three different animals.  They look different, smell different, and act different.

A successful commercial bank concentrates on safely managing customer deposits, savings plans, and making collateralized loans to individuals and companies.  Commercial bank managers are usually conservative and risk-averse.  The FDIC regulates member banks and guarantees deposits against mismanagement of funds (current limit of $250,000).

An investment bank underwrites new stock issues (where they guarantee IPOs), act as broker/dealers, and provide investment advice.  Investment bank managers are more aggressive and often take significant risks.  The SEC regulates most of these activities.

The 1933 Banking Act (Glass-Steagall) recognized these inherent differences after the stock market crashed in 1929.  The GSA clearly states that a bank can provide only one of these services, not all three.  Two or more were strictly verboten.

Starting in the 1970s, larger banks began to push back on the GSAs regulations, claiming they were rendering the large banks less competitive against foreign securities firms.  It was argued that if banks were permitted to engage in investment strategies, they could increase the return for their banking customers.  These efforts culminated in the 1999 Gramm-Leach-Bliley Act (GLBA), which repealed the provisions restricting affiliations between banks and securities firms.

The GLBA Act allowed bank holding companies to act as commercial banks and offer other financial services, including insurance underwriting, securities dealing, merchant banking, stock underwriting, and investment advisory services.  Prior to this act, most financial services companies were already starting to offer both saving and investment opportunities to their customers.  On the retail/consumer side, a bank called Norwest Corporation, which would later merge with Wells Fargo Bank, led the charge in offering all types of financial services products in 1986.

Things culminated in 1998, when Citibank merged with The Travelers Insurance Companies, creating Citigroup.  The merger violated the Bank Holding Company Act (BHCA) of 1956, but Citibank was given a two-year forbearance, assuming that Congress would change the law.  In fact, they did!  Power lobbies?

The BHCA essentially negated the Glass-Steagal Act, allowing commercial banks to become investment banks and vice-versa.  The only significant difference between pre-1929 and post-BHCA is that all activities existed under the umbrella of a bank holding company rather than a single entity.

Banks Holding Companies grew at an enormous rates, creating giga from mega companies.  Risk management became exponentially more complex and difficult for auditors, federal agencies, owners, depositors, borrowers, and others to judge bank liquidly.

If the savings and loan bankruptcies, due to unrelated causes, are removed from all bank bankruptcies during 1970–2000, the 30-year total bank bankruptees were under five for $125 billion (Continental Illinois National Bank and Trust accounted for $104 billion of the total — not adjusted).  After 2000, in just 21 years, the totals included 62 banks for $742.4 billion.  Add SVC and Signature at $327 billion, and the total is over a thousand billion, or $1,069.0 billion.  This is a rise in bank bankruptcies by a factor of ten (not adjusted).

We need to get back to bank basics.  Fast.  Current banks are too large to manage or regulate.

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