Module 4 discusses the changes to the US banking industry that occurred during the 1990s and into the early 2000s. These were the first major changes in decades. The prior major change was the introduction of the Glass-Steagall Act in the 1930s, and the changes discussed in the module essentially undid much of that act. One of the key elements in Glass-Steagall was the separation of investment banking and commercial banking activities (Heakal, 2015). One of the reasons for this separation was that investment banking was inherently more speculative, and there was a recognition following the 1929 stock market crash that even if investment banking suffered significant volatility, the nation's economy relies on having a stable commercial banking environment. Olson (2002) noted that the 1999 Gramm-Leach-Billey Act basically dismantled Glass Steagall.

One of the other key things that Glass Steagall prevented was investment bank speculation in commercial activities, such as residential real estate. The backdrop to this study is that after Gramm-Leach-Billey, investment banks began to seek out commercial banking income, not as much by buying commercial banks, but by creating investment funds in real estate. The commercial banking and real estate markets were completely unprepared for this influx of capital, and by Olson (2002) so was the Federal Reserve. A radical change in residential real estate markets occurred, and the outcome was basically that a lot...

These investments grew rapidly because of low interest rates that made housing affordable for many, but ultimately the risks of these products were revealed, and this created chaos not just in residential real estate but for any institution, government or investor holding a significant amount of these products in their portfolio.
The first three modules look at different aspects of the financial system. The first module is interesting in that it covers buyer behavior in terms of payments, in particular the adoption of new payment formats. As we shift from a cash society, to one where card payment is common, there are all these emerging new payment forms and these are changing the way that consumers behave because they lower barriers to making transactions.

Module 2 talks about banking regulations, going back to the creation of the Federal Reserve, Glass-Steagall, and eventually Gramm-Leach-Billey, and Dodd-Frank. One of the key roles of regulation is to ensure investor and consumer confidence in the banking system, but there seems to always be this tug between doing that and allowing…