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It's like déjà vu all over again

Business fashions never take long to change. But the current fad for one-stop shopping in financial services looks like being one of the shortest lived of all.

In present market conditions, universal banking has proved a winning model. With credit a scarce commodity, companies have a strong incentive to deal with banks that have money to lend. Pure investment banks have not been able to compete.

But the idea that this transient victory somehow marks the end of old-style investment banking is laughable. Sure enough, the Citibank and JPMorgan model is already under threat - not from a business point of view, but from a political angle.

The revelations from corporate disasters suggest that conflicts of interest in big financial conglomerates are unmanageable.

Regulators, shareholders and counterparties are lining up to cry foul. The larger banks look as if they will be mired in lawsuits. Already there is speculation that Sandy Weill - whose deal-making flair is matched only by his political nous - may be planning to dismantle his creation.

Turning the clock back is never a lasting solution. But one cannot forget that the Glass-Steagall Act - which separated commercial banking from investment banking in the US for 60 years without noticeable ill-effects - was intended to bolster public confidence in the financial system after the 1929 crash.

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