The Bank Holding Company Act of 1956

Written by Samuel Phineas Upham

The financial industry is largely defined by the regulations it must deal with on a daily basis. Banks are able to stay afloat based on how well they adapt to increased regulation, and how they manage to sidestep rules they find unfavorable. Typically, these loopholes are closed by new regulation, but the business model is built on the idea that a bank must factor in the risk of regulation.

Prior to the Holding Company Act, retail banks largely didn’t exist. Banks were rarely allowed to trade between states, and it was believed that bank branching would kill competition amongst banks. Some traders felt that big banks would consolidate financial power in the face of competition.

Of course, banks could form a chain of banks that would allow them to skirt this rule. Because bank holding companies were owned by groups, or groups of individuals, they were able to open independent branches. The concern came when these same institutions were allowed to own non-banking entities. The Fed was concerned that these banks had an unfair advantage because they could simply lend themselves out of any troubles they faced.

The Bank Holding Company Act helped to define those independent banking entities and provide some rules to regulate them. After 1956, a holding company was any company that held a stake of 25% or more of a particular institution. The law also defined a bank as any institution that took deposits and made loans.

In a broad sense, the act provided some oversight to the Fed. Previously, banks were able to incorporate and buy whatever they chose. After the Bank Holding Company Act, banks had to register with the Fed and submit paperwork prior to a merger. The act did have some important loopholes that needed closing, but it was a step in the right direction for consumer protections.

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Samuel Phineas Upham is an investor from NYC and SF. You may contact Samuel Phineas Upham on his Samuel Phineas Upham website

Things you need to avoid in order to get ahead

Avoiding debt is hard to do. Much worse is debt that is overburdening your life and can’t get out. Too much debt leads to stress, promote ill health, and may even lead to bankruptcy. With that in mind here are few ideas to follow.

• Carrying too many credit cards not only lead you to more debt but also wrap you in a vicious circle. One strategy is to pay lower balance credit cards first and not use them again. Be careful when tempting to cut cards which could lead to lowering your FICO Score. Limit the number of cards to manageable number.
• Think twice before charging that unwanted dress. Make a monthly budget and stick to it. Don’t give in to temptations and avoid impulse buying.
• Avoid using credit cards to pay your monthly bills. Paying for weekly grocery, utilities and other recurring expenses should be part of your monthly budget.
• Don’t use those credit cards that start charging interest from the day you use it. If you have to use a credit card, chose the one with the longest grace period better yet with the lowest interest rate too. Pay off the amount during the grace period to avoid paying hefty interest rates.