Okay, ignore the rhetoric on the page. Jefferson was kind of a jerk when it came to such things, and the commentary is 95% content-free.
In the wake of the 1929 stock market crash, which led to widespread bank failure, the Glass-Steagall Act was passed to separate banking activities between commercial (you go in and deposit money; you borrow money for your home or business) and investment (you and other speculate on the stock market, the bond market, etc.). The idea was that one of the reasons for the dramatic effects of the crash, leading to the Great Depression, was that banks had invested too much depositor money in the market. When it crashed, they crashed, taking savings along with them.
Fast forward to 1999, and the free-wheeling "anything goes, business is all" attitude leads to deregulation of banks, including Glass-Steagall.
And, hey-presto, less than a decade later, we have a housing bubble, we have stock markets tumbling, we need massive investments of government money into the banking industry to keep it from collapsing … and we have a full-press defense of "self-regulation" of the banking industry by the GOP.
Why should a bank be taking my savings account and using it to invest in the stock market, or bundled mortgage packages, or other speculative investments? And who is taking the risk there, vs. taking the benefit?
Reinstate Glass-Steagall.
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Reinstate the Glass-Steagall Act
I just signed a petition to The United States House of Representatives, The United States Senate, and President Barack Obama: Thomas Jefferson got it right when in 1802 he wrote "I believe that bankin…
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Fairly good description, Dave, except for placing blame with the GOP. It was actually Clinton who urged congress to repeal. Congress critters on both sides of the aisle have asked for more or less or different regulation in the wake of the recent crash.
Since other countries would need to institute regulations similar to Glass-Steagall for it to be effective in today's world of money without borders, I'd prefer to see a capital requirements rise as risk rises — with the capital at risk being only that of the shareholders. But yes, G-S provided some protections, the effects of which we obviously still need. The exact mechanism? Not sure if the G-S model really provides the best solution.
1999 – when Clinton was in power? I’m guessing GOP controlled the Hill, so that will be the reason given. How do you feel when the tables are turned?
@LH – As I noted to Bruce, I didn’t claim the rollback of regulation was a GOP action. It was done to many huzzahs from both sides (drowning out the occasional Cassandras). But they’ve certainly been, for the most part, the hardest hitters in trying to reinstate it.
The thing is that the ones defending self- regulation are the Reps, not the Dems. I'm less interested in who made the original mistake than who is trying to perpetuate it.
I don't think, +The Bruce, Mile High, (rereading, yup, didn't) I said the GOP asked for a repeal of Glass-Steagall. The era was full of "Things can never possibly go wrong again, because everything is going so well, so let's pull out all the safety interlocks and let the system free!~" sentiment from all sides of the aisle.
On the other hand, the GOP (mostly) have led the charge against any re-regulation of the financial industry after the last bubble-pop-system-crash, both fighting the legislation and fighting appointment of anyone to carry it out.
I don't think, +Dave Hill, (rereading, yup, didn't) say you did. However, in urging the reinstatement of G-S, you certainly sound like you are advocating it was a poor choice to repeal it in the first place — and I was only pointing out the GOP were not the only ones at fault for its present absence.
And both you and +Gary Roth clearly missed my larger point — it is simplistic to simply urge for its reinstatement. As much as I hated Clinton, he acted on a very real problem of the day (and it had nothing to do with a "things can never possibly go wrong" attitude of the day): The world had (and has still) changed since G-S was first passed and the US was losing market setting leadership to London and Frankfurt because banking operations in those countries didn't have a G-S-esque regulation constraining them. That fact still remains. And capital flight could cause far bigger problems for us than what we saw in 2008-9.
+Dave Hill, you know me well enough to know I am not a cheerleader for GOP. I do prefer market-driven solutions, yes, but the worship of Rand that has taken hold in some vocal quarters of the GOP has moved the general rhetoric emanating from it past any reasonable semblance of evidence based proposals for the most part. I tried stressing in my original response that ideas for solving the larger problem can come from anywhere on the political spectrum, as can arguments for solutions that are too simplistic. Us vs Them, Dems vs Reps tribalism has got to stop. I for one reject it.
I asked because every time I think I have a handle on US politics, and how bills are progressed, something comes up and changes that! I’m assuming fairly widespread support, or surely the Democrats would have stymied it. (A lot of people in the UK regard the Democrats as a right wing party, just not as right wing – I’m not talking ‘Blue Dog’, I mean generally – many of your comments are right of centre!)
I think it’s fair, @LH, to say that American politics is shifted significantly right of, say, most European politics. It’s something that we in the States often forget (except for people to the further Right who pooh-pooh all those pinko socialist Euro-weenies).
My general sentiment about this matter as a whole is that GS is both antiquated and insufficient. There is a good argument that even if it were in place, it world be easy to circumvent by renaming things, just as corporations do in other regards. We need something more nuanced and comprehensive than that.
Fair enough, +The Bruce, Mile High — solutions to problems can come from different directions. I would say as a general rule that resistance to any regulation of the financial markets has come from the GOP side of Congress, though there have been enough Dems involved to allow them to call it "bipartisan opposition".
It may well be, Bruce and +Gary Roth, that G-S is not currently sufficient to our needs (money finds a way, it seems), but I think its general principle is of value, and the idea that "financial institutions will adequately police themselves to avoid something like this from ever, every happening again in the future, pinky-swear" has been disproven enough times that I wish we could come up with even a partial solution.
Yeah, many of us were wondering how the whole NHS thing at the Olympics went down! There is a train of thought that was Danny Boyle saying to Cameron “Go on, try it now…”