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Using the parable of blind mice as an organizing metaphor, it argues that true risk can be acknowledged only by assessing a firm’s activities as a whole. It traces how the Glass-Steagall framework led to functional regulators, and how the GLBA created a new umbrella supervisor model centered on the Federal Reserve.",{"@graph":69,"@context":122},[70,84,105],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/umbrella-supervision-deregulation-and-financial-consolidation/324599/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/umbrella-supervision-deregulation-and-financial-consolidation/324599.png","ImageObject",300,407,{"name":92,"@type":93},"Hazel","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-17","2026-09-21",true,{"@type":102,"interactionType":103,"userInteractionCount":81},"InteractionCounter",{"@type":104},"ViewAction",{"@type":106,"mainEntity":107},"FAQPage",[108,114,118],{"name":109,"@type":110,"acceptedAnswer":111},"What lesson from the parable guides the paper’s approach to supervision?","Question",{"text":112,"@type":113},"It argues that only assessing a company’s activities as a whole reveals its true risk, mirroring how the seventh mouse deduces the elephant by exploring the entire animal.","Answer",{"name":115,"@type":110,"acceptedAnswer":116},"How did the Glass-Steagall Act shape financial supervision in the United States?",{"text":117,"@type":113},"It compartmentalized commercial banking, investment banking, and insurance, leading to separate supervisory agencies and a patchwork of functional regulators at federal and state levels.",{"name":119,"@type":110,"acceptedAnswer":120},"Why does the paper identify the Federal Reserve as the likely umbrella supervisor under GLBA?",{"text":121,"@type":113},"After GLBA created the financial holding company, Congress chose an umbrella role for the Fed, viewing it as an extension of its existing function regulating bank holding companies.","https://schema.org",{"og:url":83,"og:type":124,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":126,"canonical":83},"index,follow",{"doc_id":128,"site_id":62},324599,1792187664,{"code":4,"msg":5,"data":131},{"doc_id":128,"user_id":132,"nickname":92,"user_avatar":133,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":81,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":24,"language":139,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":140,"faqs":141,"seo_title":142,"seo_description":67,"update_tm":143,"read_time":144,"preview_page_count":4},137441390410,"https://ap-avatar.wpscdn.com/avatar/2000252f4ab5702993?_k=1776741390130283984","Umbrella Supervision  \nby Joseph G.Haubrich and James B.Thomson  \nSenyun Bina lice,achildren'sbok  \nbased on an old Indian parable,tells thestory of blind mice who visit an elephant.The first six explore the part of the ele-phant they happen upon first and eachdeclares that he has discovered either apillar,a snake,a cliff,a spear,a fan,or arope.Only the seventh mouse,whoexplores the whole of the animal,deduces that it is an elephant.The lessonof this parable for policymakers andfinancial regulators is that only byassessing the activities of a company as awhole can its true risk be acknowledged.  \nIn 1933,the Glass-Steagall Act waspassed,shaping the evolution of theUnited States'financial system througha legislative blueprint that compartmen-talized commercial banking,investmentbanking,and insurance.Not surpris-ingly,separate agencies were created tosupervise these different areas,resultingin a patchwork quilt of functional regu-lators at both the federal and stategovemmental levels.  \nIn the past several years,however,thelines between commercial banking andother financial services have becomeincreasingly blurred.Deregulation,mostrecently in the form of the Gramm-Leach-Bliley Act of 1999(GLBA),andearlier in the form of the Reigle-NealAct of 1994,has lifted interstate branch-ing restrictions and dismantled manyof the statutory limits on financial con-solidation that were the heart of Glass-Steagall.This legal sea change,alongwith technological innovationsandfinancial engincering,make increasedintegration of financial markets andmore competition among financial firmsseem likely.However,consolidationdoes not seem as imminent for the regu-latory agencies that will supervise these  \necONOMICCOMMCNTCRY  \nnew and diverse financial services firms.Instead,GLBA has created a new type ofbank holding company—the financialholding company,where activities suchas merchant banking and insuranceunderwriting,which previously were notpermissible for banking firms,are nowallowed—and named the FederalReserve,the seventh mouse ifyou will.as umbrella supervisor.(Thrift holdingcompanies remain regulated by theOffice of Thrift Supervision and invest-ment bank holding companies by theSecurities and Exchange Commission.)  \n■ Financial Holding  \nCompanies  \nThere are several ways of conductingdifferent financial services in the sameorganization:the universal bank ascurrently practiced in Gemany,whereall financial services are done within thebank;the bank subsidiary model,wherenonbanking activities are done in sepa-rately chartered subsidiaries of the bank;and the bank holding company model,where nonbanking activities are done infirms owned by a parent company thatalso owns the bank.The United Stateshas used the bank holding companyform since the mid-1950s.  \nPrior to GLBA,bank holding companiescould own banks,thrifts,and other firmsengaged in activities deemed closelyrelated to banking by the FederalReserve Board.However,supervision ofbanks and thrifts owned by a parentholding company fell to the company'sprimary federal or state regulatoryagency—its functional regulator—andsupervision of nonbank subsidiaries ofbank holding companies and the consoli-dated holding company fell to the Fed-eral Reserve.Under this regulatorymodel,the “umbrella supervisor”of the  \nSeptember 15,2005  \nDeregulation and financial consoli-dation have led to the development offinancial holding companies—allow-ing commercial banking,insurance,investment banking,and other finan-cial activities to be conducted underthe same corporate umbrella—andthe Federal Reserve has been namedsupervisor of the consolidated enter-prise.This Commentary explains theinereasing importance of anumbrella supervisor amid the sea ofregulatory agencies,and why the Fedmay be the best natural choice,bothpractically and conceptually,toassume the role.  \nholding company—the Fed—wouldexamine a bank or thrift subsidiary ofthe holding company only under exigentcircumstances,relying on the supervisory judgment of th","cbCaidCStav4Jc59","https://ap.wps.com/l/cbCaidCStav4Jc59","pdf",1105632,"English","# Umbrella Supervision\n## Financial holding company and the umbrella supervisor\n## Models for conducting financial services in one organization\n## The shift from Glass-Steagall to GLBA supervision\n## Functional regulation after GLBA","[{\"question\":\"What lesson from the parable guides the paper’s approach to supervision?\",\"answer\":\"It argues that only assessing a company’s activities as a whole reveals its true risk, mirroring how the seventh mouse deduces the elephant by exploring the entire animal.\"},{\"question\":\"How did the Glass-Steagall Act shape financial supervision in the United States?\",\"answer\":\"It compartmentalized commercial banking, investment banking, and insurance, leading to separate supervisory agencies and a patchwork of functional regulators at federal and state levels.\"},{\"question\":\"Why does the paper identify the Federal Reserve as the likely umbrella supervisor under GLBA?\",\"answer\":\"After GLBA created the financial holding company, Congress chose an umbrella role for the Fed, viewing it as an extension of its existing function regulating bank holding companies.\"}]","Umbrella Supervision - Deregulation and financial consolidation | PDF",1789968366,13]