The Incredible Shrinking Banking IndustryFewer Players in a Riskier, more Complex Game

To some, the tumultuous events in the credit markets in the summer of 2007 came on suddenly and without context. While the extent and magnitude of the dislocations were certainly unexpected, the author argues that the groundwork for such events was gradually formed over the past generation by evolution within the financial services industry. The resulting new architecture of this industry has much to recommend it, but it may present a new type of systemic risk that will challenge policy makers.