Skip to comments.Bring back Glass-Steagall banking regulation
Posted on 10/13/2011 4:35:13 PM PDT by Twotone
In Tuesday nights Dartmouth debate, the Republican candidates were generally agreed on the need to repeal Dodd-Frank. That is all well and good, but banking does need regulation. For 70 years a cluster of New Deal laws, the Glass-Steagall laws, successfully prevented American banks from becoming too big to fail. Dodd-Frank should be repealed, and an updated Glass-Steagall should replace it.
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This is rubbish. Strike at the root of the problem and abolish central banking.
You mean abolish Federal Reserve? Yes, I would agree.
Except it will be extremely difficult to achieve.
Repeal of Glass-Steagall is not difficult.
It doesn’t need to be ‘updated’. Just get rid of Dodd Frank and put Glass-Steagall back the way it used to be before Clinton and the Republican congress messed with it. Get rid of Sarbanes-Oxley too while you’re at it.
The CEO of the Bank I work for (No, I won't name it) said this very thing today.
“Dodd-Frank should be repealed, and an updated Glass-Steagall should replace it.”
I would agree.
In a purely theoretical manner the repeal of Glass-Seagal asked why should one type of financial service be restrained from merging with a different kind of financial service.
I don’t think they sufficiently respected the different fiduciary standings that banks, insurers and brokerages have. They are not only financial services all, they are in many ways very primary customers of and to each other.
It brings two very simple questions:
If your bank is offering you a form of insurance, issued by its insurance subsidiary, is it doing equal due diligence about that insurance product as you would hear on that same product if you had a different bank.
When your insurer invests what it needs to for its reserves, so that it will still be in business when you need to make it claim, how much of its investment decisions are colored by the banking and brokerage subsidiaries that it is corporately linked to and is that truly the best due diligence you want your insurer to have.
I once had a treasurer of the outfit I worked for exclaim that there was no conflict of interest going on in our use of both accounting services and management consulting services from the same company. I exclaimed that the accounting professionals were all CPAs and would not violate the ethical standards of a CPA, no matter what. I frankly told him “horseshit” and worked to get our Board’s audit committee to disallow the practice. Why? Did I know that something was amiss between the advice of the auditors and the advice of the management consultants? No. I just thought it best to not put the temptation out there. I thought that was the best policy with regard to our own fiduciary responsibility.
My own belief is that the TOTAL repeal of Glass-Segal WAS to help Banks become financially massive organizations, and that prospect was neither necessarily essential for banking, for insurance, for brokerage or other financial services to be “better” in their own regard.
Yeah, get rid of the Fed Reserve; though unfortunately, given the history of central banks in this country, it’d likely only be a matter of time before another one reemerged in its place.
As a former state regulator and current banker, I agree with the article. In addition to repealing Glass-Stegall, Reigle-Neal, I think, created financial holding companies and permitted pretty much unfettered interstate branching, which further fueled the rapid growth of the mega-banks. It set a limit of 10% market share of any one interstate bank in one state, but that did not adequately limit the size of banks.
That series of legislation is one thing that led me to believe that our economy was purposefully set up to falter. Then, during the mortgage and liquidity crises, they permitted the mega banks to get even bigger through acquisition of failed banks, the exact opposite of what should have happened. FDIC has set up interim banks on several occasions to wind down the operations of failed banks. Such an arrangement could have been made to allow time to break up these failed mega banks and sell off smaller pieces of the franchises so that they did not further exacerbate the concentration of banking assets. For that reason, I don’t think the bad guys are done playing “pop the banking bubble”.
Michael Savage has been saying this for years .
I think that also removed the leaverage limits as well.
Others, like Cato, dismiss that argument. Obviously Bill Clinton, who signed the bill, and Phil Gramm, who wrote the bill, are among those who dispute Krugman's finger-pointing claim. That said, in exchange for their votes replacing Glass-Steagall, the Democrats pushed for changes to Community Reinvestment Act.
Obviously Dodd-Frank is an abomination but I don't know many candidates pushing for a return to Glass-Steagall. I know Newt wants to repeal Sarbanes-Oxley; a quick search online suggests he might have written about returning to Glass-Steagall. Newt retired from the House before the repeal later in '99.
This is exactly what should be done first among other things. This act protected us from the fraud for almost 70 years. As soon as they did away with it then we went straight back to 1929 in less than a decade. What this act did was to separate the holding banks from the speculative wall street scams, and the “Investment” banks. Sadly, the bill that repealed it was sponsored by 3 republicans. The CRA may have been bad, but it was far from the whole cause of the mess we are in now.