At a time when some legislators are blaming the breakdown in the separation of commercial and investment banking for the credit crisis, California lender Wells Fargo
A new "universal bank"
The decision effectively creates a new "universal bank," similar to JPMorgan Chase
For shareholders of Wells Fargo -- such as me -- this decision raises some concerns. The securities business can be wonderfully profitable, but it is also highly oligopolistic, with the top firms earning the king's share of profits and ready to defend their franchises tooth and nail. Furthermore, investment banking is an entirely different culture from the comparatively staid world of commercial banking. The history of commercial bankers trying to integrate and manage investment banks is littered with corpses.
On the bright side, Wells Fargo has made it clear that it will focus on lower-risk, customer-driven businesses -- it won't rely on trading for its own account for profits. Goldman Sachs, by contrast, earns a significant share of its profits from principal activities.
What would Warren think?
Still, I have to wonder how Wells Fargo's largest shareholder, Warren Buffett's Berkshire Hathaway
Confused by this market? Looking for specific stock names? Morgan Housel highlights three high-quality companies that are still cheap.
Take a hint from Warren Buffett's recent investment in Goldman Sachs preferred shares: In this market, dividends will be a big part of future returns. The team at Motley Fool Income Investor can show you how to build -- and manage -- a portfolio of stocks that pay a growing dividend. To find out their top five recommendations for new money now, take advantage of a 30-day free trial today.
More from The Motley Fool
Can Groupon Stock Keep Going After Last Week's 9% Pop?
The leading provider of flash-sale deals moves higher after an analyst upgrade.
Can I Pay My Taxes With a Credit Card?
You can -- but you shouldn't.
Better Stock: Procter & Gamble Co (PG) vs. Unilever NV (UN)
It's a virtual tie of solid dividend-payers. But this one factor gives one a winning edge.