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
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