[JumpCrisscross]

> The bank holds the loan

These are mostly syndicated. The traditional difference between loans and bonds was bank versus investment bank. The modern difference is in underwriting technique, degree of syndication/securitisation and loans mostly being floating and bonds mostly being fixed.

[lokar]

I mean the classic “it’s a wonderful life” model

[JumpCrisscross]

Convergent evolution in finance is actually a pet interest of mine. It seems like it's mostly driven by regulation. But the more you stare, the more the regulation appears like a canyon wall and the hydrology customs and connections. I'm not sure what the underlying geology is, however. Something bigger than customs or laws, but not so grand that it becomes ethereal.

[lokar]

The pattern I see is:

The Banks get in trouble, and Gov has to step in. So Gov, reasonably, add regulations and restrictions. But the law can't be really specific, it requires gov employees to actually examine the bank and make decisions (eg about risk levels, etc).

The banks have a really large incentive to chip away at the effectiveness of the regulation. They hire lots of lawyers, consultants, notable economists, etc and just keep pushing on these rank and file gov regulators. They buy influence with politicians, and use that to pressure the regulators. They hire some of the regulators at very high pay, sending a signal to the others: play ball and a nice job awaits you.

Over time, they just wear down the regulators. The rules are interpreted to be mostly ineffective and nonsensical. Often at that point the politicians come in and just de-regulate.

The banks just have the incentive and focus to keep at it every day for years. No one else with power is paying attention.