Technology & Finance
Glass Steagal Is 34 Pages
Nice point by Gretchen Morgenson at The Times on Sunday.
“Glass-Steagall was a 34-page document.
“The two bills that the Senate and the House are currently chewing over as part of what may be a momentous financial reordering weigh in at a whopping 3,000 pages, combined.”
And the banking lobby is working hard to make the bill less restrictive, especially on regulation of derivatives. Will this new legislation fix things? She doesn’t think so.
“According to Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond, Va., only 18 percent of the nation’s financial sector was covered by implied federal guarantees in 1999. By the end of 2008, his bank’s research shows, the federal safety net covered 59 percent of the financial sector.”
“In a speech last week, Mr. Lacker said that he feared we were going to perpetuate the cycle of financial crises followed by taxpayer bailouts, in spite of Congressional reform efforts.”
Preventing another crisis simply requires elminating banks that are too big to fail by capping their size. Let them split up operations into separate companies. That would increase competition, probably improve profitability and would require limited regulatory oversight.
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