. the historic statutory separation of banking and insurance was altered in 1999 when the congress enacted the gramm - leach - bliley act ( glb act ) and allowed well - managed and well - capitalized banks to affiliate with insurance underwriters and insurance agencies. that brings the federal reserve and state insurance professionals into the same circle. to date, about 630 bank holding companies have chosen to become financial holding companies, the vehicle under the glb act through which bank, insurance, and securities affiliations may take place. of those, about 165 ( more than 25 percent ) use the new glb act authority to engage in insurance agency activities while only 26 ( fewer than 5 percent ) are engaged in underwriting insurance that is unrelated to credit. all of these companies must comply with state laws governing the sales and underwriting of insurance. the significant interest by banking organizations in selling insurance makes sense. the banking system is still dominated, in number, by small banking organizations. more than 90 percent of the banks in this country have total assets of less than $ 500 million each. banks of all sizes have quite large branch networks - as of the end of last year there were almost 67, 500 branches of the more than 7, 800 commercial banks in this country. entering the insurance market as an agent, not as an underwriter, fits naturally with the nature of banking as an industry dominated by smaller providers. more broadly, banking organizations have developed good networks and systems for delivering financial products to consumers - a business model that does not always require manufacture of the product. insurance is increasingly viewed not just as a product that stands on its own, but as an important item on a menu of financial vehicles that help consumers create a portfolio of financial assets, manage their financial risks, and plan for their financial security. many consumers prefer to make their financial decisions and purchase financial planning products at a single location that offers a full package of financial services. thus, banking organizations are a natural alternative delivery system for insurance underwriters looking to expand their customer base. the affiliation of banks and insurance underwriters has been more modest. one large banking organization has affiliated with a large insurance underwriter, and one large insurance underwriter has acquired a small bank. in addition, several foreign banks with insurance operations abroad have begun to offer both insurance and banking products in the united states. before the glb act, these foreign banking organizations were required to choose between operating as a bank in the united states or engaging in insurance activities

and an mba earned at night. because the bank was just starting up, there were only 11 employees. with lots of work to be done and not many people to do it, i was able to try my hand at nearly every job at the bank and to see the results of every action that was taken. much of my time as a community banker was spent lending to small businesses. in many banks today, small business lending is an automated process that relies on computers to analyze data and determine a borrower ’ s creditworthiness. for me, the process was personal. it involved sitting eyeball to eyeball across the table from my customer. more often than not, the customer was someone i knew well and had been lending to for years. occasionally, he or she represented the second or even third generation to run the business. or the business itself was the second or third venture that i had financed for the same borrower. there were financial statements to be gathered and analyzed. usually it was difficult, if not impossible, to separate the business and personal finances. but understanding the borrower ’ s ability to successfully run a business was just as important as analyzing the numbers. i spent a lot of time talking to business owners about their businesses. in fact, bis central bankers ’ speeches sometimes i thought they came in looking for a sounding board for their ideas as much as they were looking for money. at times, especially during the economic downturn of the early 1990s, i had to deal with problem loans. some were resolved through restructure and some through foreclosure. now, as a bank regulator in the middle of a financial crisis, this deep personal understanding of the lending and loan collection process strongly influences my policy views. and i have never lost sight of the importance of those small businesses to local economies or the importance of loan availability to small businesses. from community banker to central banker i fully expected to complete my career working as a community banker in my hometown. but in early 2007, i received a call asking if i would be interested in serving as a member of the board of governors of the federal reserve system. i was intrigued, flattered, and more than a little intimidated by the prospect. i had interacted with the fed throughout my banking career and had even served on the board of directors of the federal reserve bank of richmond. so i knew a lot about the federal reserve. but there was no way that i, or anyone else, could have foreseen