Have you ever stopped to think about how the breakup of AT&T revolutionized the information and communications technology (ICT) market? Most people probably haven’t, but in 1984, the end of the regulated monopoly ushered in an era of unprecedented competition and innovation. For those who are not familiar, AT&T broke up in 1984 after it decided to end a long, drawn-out lawsuit brought on by the U.S. Department of Justice because the company was considered a monopoly. AT&T had two options. It could spin off its 22 local operating companies into seven Bell holding companies, and maintain control of their equipment manufacturing and research and development operations. Or, it could relinquish control of equipment manufacturing and research and development while retaining control of their local operations. They chose the former, but they never seemed to shake off their reputation as a monopoly even though the government made the company split off their assets. Still think "revolutionized" is too strong a characterization? Google the AT&T breakup on your iPad or use your mobile phone to ask a friend and in the process you will utilize three products whose existence is in a large part a direct result of the divestiture.
While the ICT market flourishes, the same cannot be said for today’s financial services system. In the aftermath of the worst economic crisis since the Great Depression, it is credit delivery products and innovation that will stimulate economic growth. However, marketplace advances aren’t keeping pace with innovation. This isn’t about products like the subprime mortgages; those will forever be a cautionary tale about greed. In fairness, the overwhelming majority of Americans had nothing to do with that fiasco, but nonetheless continue to pay an enormous price. In a recent speech to address the nation’s slow recovery, John Williams, president and CEO of the Federal Reserve Bank of San Francisco, cited tight credit as a by-product of the housing bust and emphasized what we all know, that for many, credit is more difficult to find. Moreover, according to Williams, “Tight credit is among the factors that work to reduced desired spending by household, businesses, and government below the level consistent with full employment.”