4- Many experts argue that banking has been extremely vertically integrated. Vertical integration is the degree to which a company creates all parts of its product or the degree to which it distributes and sells those products itself. It seems likely that the degree of vertical integration will fall dramatically at many banks in the future. Most banks will have to purchase Internet payment systems, mutual fund products, and investment banking products from third parties. After all, does General Motors make its own tires or purchase them? Although General Motors does produce many of the products used in the automobiles that it sells, it acts as a general contractor to produce and sell the final product. The merger between Citicorp and Travelers—Citigroup—

appears to be a move toward a more vertically integrated approach to banking. Sears tried this approach once before by integrating a retail store with an investment banker

(Dean Witter), a real-estate broker (Coldwell Banker), S&Ls, and insurance sales and underwriting (Allstate). This system did not appear to work as Sears has since completely divested itself of these lines of business. Do you think vertical integration will work this time? What advantages do you think the new Citigroup has that Sears did not? What about the future of smaller banks that are less vertically integrated? Do they have a future as general contractors of services? Explain.