Gary Gorton and co-authors write,

banks will choose to create private money by investing in projects that are less risky and more opaque; opacity makes the cost of information acquisition higher. Note that the implied allocation of projects between banks and financial markets does not rely on any comparative advantage that banks have in evaluating and overseeing its assets.

I like the basic picture of financial intermediaries as holding information-rich assets and issuing low-information liabilities. This is similar to George Gilder channeling Arnold Kling.

I am not convinced that banks’ comparative advantage comes from corporate debt being more opaque than corporate equity. I suspect that what differentiates 20th-century banks from other financial intermediaries is their relationship to the government.