Goldman Has Some New Divisions

The basic historical situation is that there were commercial banks and investment banks.1 Commercial banks did things like lending money to companies, making mortgage loans, offering checking accounts and issuing credit cards. Investment banks traded stocks and bonds and offered advice to companies on mergers and stock and bond offerings. In the US, the Glass-Steagall Act of 1933 kept these businesses separate, more or less prohibiting commercial banks from trading stocks and bonds, and investment banks from taking deposits.

Like any big company, these companies had different divisions, different business lines. A commercial bank might have a division that loaned money to companies, and another that did transaction banking (checking accounts, etc.) for companies, and one that did mortgages, and one that did credit cards. An investment bank, confusingly, would have an “investment banking division” that advised companies on mergers and stock and bond offerings, and a division (“sales and trading” or perhaps “securities”) that traded stocks and bonds for clients. And there was some overlap; both investment banks and commercial banks were often in the business of managing money for clients, and so they might each have an asset management or wealth management division.