For the fanatics who think that ANY regulation is bad, well......tough.
Not only has Paul Volcker emphatically said that separating investment-banking from commercial-banking is in the national interests; we find it echoed:
As another older banker and one who has experienced both the pre- and post-Glass-Steagall world, I would agree with Paul A. Volcker (and also Mervyn King, governor of the Bank of England) that some kind of separation between institutions that deal primarily in the capital markets and those involved in more traditional deposit-taking and working-capital finance makes sense. --NYT Letters/Editor
The signatory is an ex-Chairman of Citibank, John Reed.
It was a mistake to repeal Glass-Steagall. Fix it!
HT: Ritholtz
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6 comments:
Thank you. Agree 100%.
That is all.
I agree a new GS is needed, but I can't figure out Reed in this case. Didn't he argue for repeal of GS during the citi/travelers merger?
Is he a good guy who made a mistake, a bad guy who saw the light, or in this case is it OK to just go ahead and shoot the messenger?
Well.....
I was not enthused about the repeal when it happened in the first place, and having Volcker on my side is enough. Reed is icing on the cake (not necessary, but nice to have...)
The point I want to get across is that doctrinaire "no reg" people are just as daft as doctrinaire "regulate everything" people.
Having spent most of my professional life in banking, I always thought - post the '29 Crash - that Glass-Steagall was the right thing for banks.
G.K. Galbraith once noted, in relation to the 1929 Crash, that 'financial memory' lasts about 20 - 30 years. That's when people forget the lessons of the previous debacles and make the same mistakes all over again again. In light of recent history that seems about right to me...!
Yah, well, when was the Ag Lending crisis.....about late 1970's?
That would be 30 years....
Re-establishing Glass-Steagall won't be enough though. The "too big to fail" issue hasn't been fixed even after what we've gone through in the last year. Now, we have even more concentration of risk at the top of the food chain all backed by Uncle Sam once again.
These banks need to be broken up entirely. I don't care how you go about doing this, but this needs to be addressed or the next financial crisis will make this one look like a walk in the park.
....and it won't be another few decades in between crisis' this time either.
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