Adam Copeland at the New York Fed has a great new paper out about how bank holding companies -- the big conglomerates like JPMorgan and Citigroup that were made possible when the wall separating commercial and investment banking was torn down in 1999 -- get their money.

He separates their revenue into three sources. On the one hand, there's traditional banking -- mortgage loans, credit cards, savings accounts, and so forth. Then there's nontraditional banking, such as trading on the bank's own account and investment banking. Finally, there's securitization, which is the bundling of assets into more complex instruments, like the mortgage-backed securities whose crash caused the late 2008 financial meltdown. Interestingly, small, medium and big banks make roughly the same amount from securities, and the percent that big banks get has fallen considerably since the crisis hit:









But bigger banks make a much, much higher fraction of their money from nontraditional sources like investment banking and internal trading, and the discrepancy was growing when the crisis hit:








Among other things, this implies that policies like the Volcker rule, which seeks to ban banks from "proprietary trading" -- that is, making bets on markets for the sake of the bank rather than a client -- will disproportionately hit big banks.