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Forum Post: Glass-Steagall Act $1 Question

Posted 8 years ago on Oct. 21, 2011, 12:34 p.m. EST by boredperson (225)
This content is user submitted and not an official statement

I will gladly pay anyone $1 if they can: (1) Tell me what part of the Glass-Steagall Act was abolished (2) How this abolishment affected anything (3) What the Glass-Steagall Act has to do with anything (4) Provide any evidence whatsoever that makes pertinent the Glass-Steagall act to OWS. I'm sure this will be the hardest $1 you will ever earn.

57 Comments

57 Comments


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[-] 3 points by aarongreenspan (36) from Palo Alto, CA 8 years ago

http://www.plainsite.org/issues/index.html?id=11

1) The Gramm-Leach-Bliley Act repealed the Glass-Steagall Act of 1933 in full. As a result, United States Code Title 12, Chapter 3, Sub-Chapter X, Section 377 was repealed.

2) The repeal allowed Citibank to merge with Travellers, an insurance company, to create Citigroup, one of the largest banks in the world (if not the largest). It also later paved the way for several traditional banks to take higher risks with their depositors' funds as their investment banking arms grew in power.

3) The Glass-Steagall Act, were it still in place, would have prevented much of the chaos that seized the global markets in 2008, and unemployment now would be far lower as a result. Reinstating it now could prevent future economic hardship.

4) Many (but not all) OWS protesters are first and foremost angry about the high unemployment rate. Others are simply upset about the gross abuses of power by wealthy banks and government leaders. The evidence that additional careful regulation is needed in the investment banking sector is all around us--there are plenty of articles documenting the unprecedented inequality in the economy today.

[-] 2 points by Howtodoit (1232) 8 years ago

maybe more than you asked for, but I hope this helps even more:

Here's how we can easily Reform Wall Street: Take away their powers "once again." And a Million People March on The Hill will help get it done!

For example, "We are here Congress because we want to bring REINSTATE the Glass-Steagall Act of 1933 http://www.investopedia.com/articles/03/071603.asp#axzz1aPEc3wX which helped saved our country from the Great Depression by preventing investment companies, banks, and insurance companies from merging and becoming large brokerage firms; instead of just being Banks and Insurance companies--why can't we learn a history lesson here Congress? Btw, why did most of you vote for its final repeal in 1999? http://www.counterpunch.org/2008/09/19/shattering-the-glass-steagall-act (2nd story here)

Think about where we are now, it all started in 1999 with lawmakers like Senator Phil Gramm: CNN's The Ten Most Responsible for Economy Collapse: http://www.youtube.com/watch?v=gKQOxr2wBZQ&feature=related

Furthermore, we also want you to CHANGE the Commodities Future Modernization Act of 2000 http://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000 BACK to where it was before 2000, which since has deregulated energy markets and consequently allowed for such scams as The Enron Loophole; whereas in the early 2000's Enron Corp. was charging 250 bucks plus for a kilowatt hour...They all when to jail for this. But, the Enron loophole is still not closed, for example, allowing speculators to resell barrels of oil over and over again before it reaches the gas station owner. It's basically, legal gambling at our expense. What were those lawmakers thinking then? What are you thinking now? Either do the right think, or you're part of the 1%."

Why are oil prices high? The Enron Loophole

http://www.youtube.com/watch?v=zbdtTGYQBMU&feature=related

http://www.youtube.com/watch?v=PNp0y0SjOkY&feature=related

Rolling Stones Reporter: Truth about Goldman Sachs--how they have cornered the markets--basically, The Enron Loophole and the Repeal of Glass-Steagall Act in 1999. http://www.youtube.com/watch?v=waL5UxScgUw

Let's get focused and bring back Glass-Steagall Act of 1933, they got it right 1933, we don't need to REINVENT the wheel because bringing this Act back will create an even playing field once again....and let's finally Close the Enron Loophole, which allowed Enron to charge what they wanted for energy; they went to jail for this; but no one closed the loophole, why? Re-election Monies from the banks and oil companies! The writing is on the wall.

[-] 2 points by thebeastchasingitstail (1912) 8 years ago

And now that the boundary between investment banks and and commercial banks has been done away with, things like this are starting to happen:

BOA moves trillions of dollars in risky derivatives to subsidiary with FDIC insured deposits.

http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html

[-] 2 points by frankchurch1 (839) from Jersey City, NJ 8 years ago

Commercial and investment banking should be separate, because investment banks sell off other people's money. It turns a bank into a gambling casino, which is bad for people who didn't sign up to play.

[-] 1 points by peteywheatstraw (22) 8 years ago

boredperson, if everybody has it wrong and you have so much clarity, why don't you go down to wall street to talk and educate the people. If the point is to educate, than put your best foot forward. If your only point is to express your opinion and display your economic knowledge, go f yourself

[-] 1 points by jamesvapor (221) 8 years ago

can we just pay for the right answers ? someone pass around the collection plate. ill put in 2.00 but we have to agree on the question.

[-] 1 points by riethc (1149) 8 years ago

Are you going to put a deadline on it too? lol

[-] 1 points by boredperson (225) 8 years ago

Yeah, the whole point of this was to see what it's like to be a teacher, and how money can aid in positively reinforcing my students to do work. Mission accomplished, right?

[-] 1 points by peteywheatstraw (22) 8 years ago

whats its like to be a teacher is to be motivated by the idea that you will help others, not see how it makes you feel. you need to be a grown adult before you can enjoy your money you so obviously keep precious and dear

[-] 1 points by riethc (1149) 8 years ago

One dollar isn't much of an incentive, but your mocking tone is.

[-] 1 points by peteywheatstraw (22) 8 years ago

boredperson, you need a girlfriend bad. At least one that loves you for you. Im sorry, i understand your pain.

[-] 1 points by boredperson (225) 8 years ago

Masturbation works just fine for me, thanks.

[-] 1 points by peteywheatstraw (22) 8 years ago

living and enjoying life is about about sharing, love, family, all the things that are free. trying to find people to who are less educated than yourself to challenge them on something you obviously know about does nothing to help anything except your ego. Your right hand can't make you feel whole. I wish you luck.

[-] 1 points by boredperson (225) 8 years ago

I use my left hand as well.

[-] 1 points by peteywheatstraw (22) 8 years ago

I'm sorry bored person, i feel for you and understand. watching your pathetic attempt foe some human interaction really makes me appreciate what i have. i hope you have a full life with your two friends.

[-] 1 points by JoeThePatriot (153) 8 years ago

I saw a video that explaned it pretty well I think. Is was really professional but long. I don't reallly understand it very much but the bottom line was they borrow 1 dollar and loaning 30 dollars?

Yeah I no I probaly didn't win the buck

[-] 1 points by joerauh (32) 8 years ago

this is actually a pretty valid post, boredperson.

the repeal on the prohibition of investment banking by commercial banks did not directly lead to the crisis.

and in fact, BofA would not have been allowed to buy Merrill under Glass-Steagall, and you can argue that the BofA/Merrill deal was an important step in stopping a further meltdown.

But Gramm-Leach-Bilely did lead directly to the rapid growth of very large financial firms, including Citigroup, BofA itself, Goldman, etc.

And so I think it is fair to say that without the repeal of Glass-Steagall, there might not have been institutions that were "too big to fail."

This doesn't mean there wouldn't have been a crisis, but it means that the crisis might have been lessened, might not have required so much government intervention, and might not have created so much ongoing moral hazard.

Might. Not for sure.

[-] 1 points by MattLHolck (16833) from San Diego, CA 8 years ago

the separation between investment banking and home banking

[-] 1 points by larryathome (161) from Red Bank, NJ 8 years ago

http://www.google.com/url?sa=t&rct=j&q=gramm%20leach%20bliley&source=web&cd=1&ved=0CCgQFjAA&url=http%3A%2F%2Fen.wikipedia.org%2Fwiki%2FGramm%25E2%2580%2593Leach%25E2%2580%2593Bliley_Act&ei=KqShToWsBOGO0gG3mpz7BA&usg=AFQjCNFU_YFy-Qob1_O2785-TJsuDm8GIg

This is Wikepedia telling about this and this hurt us because it allowed the banks to leverage up and be too big to fail by eliminating the regulation that separated savings banks from investment banks. This allowed them to create sub-prime mortgage backed securities that were held by common folks' pensions. It has a deep impact on OWS, because it is how the top 1% was able to raid the bottom 99% and our pensions and college funds. This is pertinent absolutely and if you do not see this, you need to stay dumbed down and accept getting your neck stepped on by the top 1%. I do not want your dollar. I don't need to research this. If you do not know this, you had better get informed now. It is your country at stake. In fact, I want to make Glass-Steagall to become a constitutional amendment with Article V so that the banks are no longer in a position where we are beholden to them to keep our financial system from collapsing. It would end "Too Big To Fail".

[-] 1 points by Ibycus (11) from Dodge City, KS 8 years ago

right on.

[-] 1 points by boredperson (225) 8 years ago

I suppose I should've clarified and asked what the Glass-Steagall Act has to do with a free market. That question I suppose might be worth $2, it being much harder. You might not have wanted my $1, but I'm sure you'll want $2.

[-] 1 points by larryathome (161) from Red Bank, NJ 8 years ago

I don't want your $2. I do not want banks to be "Too Big To Fail" and hold the taxpayers hostage by getting in the position to need a bailout. This is an understanding that many movement members have. Glass-Steagall was put in place by our government in the 30s to break up the big banks that caused the depression. I also propose taking the Federal Reserve ownership away from the banks for the purpose of having the people be in control over monetary policy. It is a big scam that private institutions and one person have control over our financial system when their goals are big bonuses instead of working on behalf of the people. This is about what we need to do to have control over our financial markets so they are regulated to do business ethically and face punishment for criminally negligent activity.

[-] 1 points by boredperson (225) 8 years ago

I suppose my only point here (and considering your views I have no idea if I'm preaching to the choir), is that individuals think that the abolition of a portion of the Glass-Steagall act is an act of deregulation and therefore means that free markets are bad. When in reality, the banking system we have, with or without the Glass-Steagall Act, is not a free-market banking system.

[-] 1 points by TLydon007 (1278) 8 years ago

"When in reality, the banking system we have, with or without the Glass-Steagall Act, is not a free-market banking system."

Can you name an example of a "free-market banking system"??

Also (just ask yourself this question), had Gramm-Leach-Bliley lead to unprecedented prosperity, low unemployment, and all the promises of growth that deregulation advocates always promise, would you still be rejecting it as an example of "free markets" doing their work or would you be boasting about its success??

[-] 1 points by boredperson (225) 8 years ago

If the current banking system was very effective, then obviously I would be forced to reconsider my beliefs. I cannot name you an example of a free-market banking system as I can hardly name you an example of a free market.

[-] 1 points by boredperson (225) 8 years ago

But what does it have to do with a free market?

[-] 1 points by hairlessOrphan (522) 8 years ago

What is has to do with the free market is its distortion of risk and reward, which is supposed to be a regulating influence on free market actors.

By allowing retail banks to take on risky investments, the bank as an institution reaps rewards of success, but it's the retail bank's depositors that take on the risks of failures, often without their knowledge. When those bank failures are prevented by the government - partly to protect the bank's depositors, but primarily to protect the banking institution - then the risk is transferred instead to the public.

But the reward is still going to the banking institution. This distorts the costs and incentives of risk-taking by the management and leadership of the banking institution. One of the pillars of free market ideology is that proper risk and reward calculations will incentivize institutions to protect themselves better than outside actors (i.e. government) can. But this is not proper risk and reward calculation when there's no price for failure.

You can take my two dollars down to Zuccotti Park and drop it in one of the donation buckets.

[-] 1 points by boredperson (225) 8 years ago

Damn... I was gonna buy some gum with it...

[-] 1 points by larryathome (161) from Red Bank, NJ 8 years ago

The free market in just about any product line should have consumer protections in place so they cannot run amok and gauge consumers or place unsafe products in the hands of people. A market should be free to a degree, but if you completely eliminate government from health care, you will see that the private market will destroy the lives of the consumers and is that truly representative of the will of the people to see their homes get taken because of medical bills? Sounds to me that you are with the right wing of congress. The people seem to hate the way our government is ran and want to be taken care of when they get sick. Go back to your own friends and family who need the protections that our government has in place. Ask them if they want to be denied coverage when they get sick. http://www.youtube.com/watch?v=-usmvYOPfco

[-] 1 points by boredperson (225) 8 years ago

Oh lovely. Because you have so much evidence to prove that private healthcare will "destroy the lives of the consumers." Right, because by destroying people's lives, you can make soooo much money...... Socialism is far more inefficient than private health care, and is a tad oppressive....(just a tad). History has shown, although I'm not sure if you've looked there yet, that companies aim to cater to individuals with the least income all the time. Why, you probably ask. Because it is profitable! Private healthcare would cater to people of all incomes, because, why?, you ask again. Because it is profitable.

[-] 1 points by larryathome (161) from Red Bank, NJ 8 years ago

I have seen it happen. I watched United Healthcare deny coverage to a friend of mine that ended up with a million dollars of medical bills even though he had a policy with them. They said his cancer was pre-existing because he had a family member die of cancer at age 70. Get the facts straight. If allowed, they will screw the consumer in every way possible to support their bottom line and make record profits. I suppose you want to defend big oil as well as they have gauged us, made record profits when the price at the pump for families is just ridiculous.

[-] 1 points by boredperson (225) 8 years ago

First of all, lets pretend we live in a free market. If United Healthcare went around denying coverage to it's consumers, well, who might then find it profitable to provide coverage to those consumers? Other healthcare companies. If United Healthcare was just acting upon the terms of the contract with which your friend agreed, then that is unfortunate. However, if United Healthcare tends to have unfavorable contracts, well then it will lose business, and people will move to another healthcare company. You're friend to a risk with the company, and he paid for that risk. This happens all the time. If I go to the new Mexican place to eat, and the food is crappy; well, I've just lost $20 by taking a risk in investing in their product. Does that mean we should have socialized Mexican restaurants?

[-] 1 points by larryathome (161) from Red Bank, NJ 8 years ago

That comparison is irresponsible for one fact. Health insurers have a near monopoly and there is little competition in the market place so they can basically get away with whatever they want through collusion. Seems that you have forgotten that there are anti trust laws in this country for that reason

[-] 1 points by boredperson (225) 8 years ago

Ugh...I've had to argue the monopoly bit far too many times... By definition, a monopoly is a company that has been granted special privileges by the government in that it has been conferred exclusive rights to the market. A large market share is not a monopoly. Monopolies wouldn't exist in a free market. Natural monopolies have never occurred historically. Competition always exists. Anti-trust laws are actually just a gigantic tax on big companies. All companies that the government has ever accused of monopolization have not been monopolies, just big companies. Economies of scale do not shield you from crappy business doing. If I have the biggest company in the world, yet I start to produce a crappy product, I might last a little longer than a smaller company, but I'll go out of business because people will move to other competitors.

[-] 1 points by TLydon007 (1278) 8 years ago

He meant to say "cartel", not monopoly. And he's right. Also, your definition of a monopoly is specifically twisted to attribute blame to the government and is not the actual definition.

[-] 1 points by boredperson (225) 8 years ago

Oh, and not to mention, fascism involves the cartelization of private business...hmmmm

[-] 1 points by boredperson (225) 8 years ago

The classical definition of a monopoly has ALWAYS blamed the government. However, if you wish me to speak more generally, I will say that a monopoly has been granted power by any coercive force.

[-] 1 points by Robespierre (89) 8 years ago

You'd have to answer all 4 questions in 8 minutes to hit minimum wage, plus who knows whether you'd make good on the promise.

[-] 1 points by boredperson (225) 8 years ago

As if minimum wage is a reflection of the market value for labor...

[-] 1 points by stray (219) from Philadelphia, PA 8 years ago

You're right, it should be much, much higher.

[-] 1 points by boredperson (225) 8 years ago

Exactly, so that unemployment can be much, much higher!! :D Although, you don't know what market value means, I assume.

[-] 1 points by stray (219) from Philadelphia, PA 8 years ago

No, it's actually you who doesn't understand what "market power" means.

[-] 1 points by boredperson (225) 8 years ago

Right....because minimum wage is not the equilibrium price? ...and is therefore inefficient? And therefore causes mass unemployment? and therefore disables companies from hiring enough labor to be efficient? right...

[-] 1 points by stray (219) from Philadelphia, PA 8 years ago

You're assuming profits are anywhere near equilibrium. You've got price makers on one hand and price takers in the labor market. Meanwhile aggregate demand has fallen off a cliff; every drop in wage rates shifts the demand curve further. Firms go under if they can't even touch their fixed costs, or cut marginal costs, meaning labor rates, meaning the demand curve shifts further, and... the moral of the story is that it is a long way down to becoming a 3rd world country.

[-] 1 points by boredperson (225) 8 years ago

Let's go some place a little more basic. The minimum wage was set into place as a binding price floor (meaning that it was above equilibrium market price for labor). What does a price floor do? It creates a surplus, in this case, of labor. If there is a surplus of labor, what might we call that? Oh yeah, unemployment. If firms cannot afford to pay the minimum wage, for X workers, they are forced to cut workers or are unable to hire any because the labor is more expensive than it is actually worth. If the company cannot hire enough workers, then clearly it is not as efficient as it could be. So what can we take from all this? Minimum wage is as dumb as every other price control.

[-] 1 points by stray (219) from Philadelphia, PA 8 years ago

Surplus is due to consolidation and the M&A madness as much as anything. Corporations, by nature, are leverage against true market dynamics. There is no market in China, only a small segment of the population can afford the products they make. You want to bring that same dynamic stateside, which is completely self destructive. Any way you look at it it's market failure.

The failure of regulations, is that they try to impose the equivalent of market dynamics to a market that is fundamentally structured to shield itself from market forces.

[-] 1 points by boredperson (225) 8 years ago

Surplus is to due to a price being above market price. The failure of regulation is that the government cannot make economic calculations. Only the price mechanism can. Therefore, the government cannot efficiently allocate resources; therefore, one would expect price controls to always be inefficient. I don't particularly understand what you're arguing here. Proponents of minimum wage only want minimum wage because they think it's a "living wage." I can't imagine any other arguments in favor of minimum wage...unless you like mass unemployment and inefficiency.

[-] 1 points by stray (219) from Philadelphia, PA 8 years ago

Can't nest any deeper. We're talking apples and oranges, labor is in the realm of marginal costs, where MRP = MC.

However, higher wages shifts the demand curve, increasing demand and reducing surplus, increasing production, and so on.

What I'm saying is that the goal of maintaining above average profits in and of itself is inefficient, and that leads to inefficiency everywhere else. Long run equilibrium would mean higher prices with less profit, however the trade off would be efficiency, and greater short run opportunity.

[-] 1 points by stray (219) from Philadelphia, PA 8 years ago

I'm arguing that the "price mechanism" you're arguing is a reflection of market failure, not market forces. Government is trying to restore something closer to true equilibrium... but that would by necessity cut into above average profits, which again, is a product of market failure.

True long run equilibrium would mean profits down, wages up. In a perfectly competitive long run equilibrium, price = average total costs = marginal costs. "Profit" amounts to covering opportunity cost. We are so far away from that free market ideal it's ridiculous.

[-] 1 points by joerauh (32) 8 years ago

posting on the below, i think labor is different from other commodities, because we as a society are comprised of humans who value humans more than things. that's why we can't be owned by other people, although a refrigerator can be.

[-] 1 points by boredperson (225) 8 years ago

Oh, so you actually think that the government imposed a minimum wage because it can somehow predict the market price better than the market can? Oh.... so you don't think that efficiency is when marginal benefit = marginal cost? Equilibrium price is MB = MC, yes? And the existence of a surplus means that efficiency or the real market price hasn't actually been achieved, yes? So I'm confused... Do you think that the price mechanism, in all cases, is a reflection of market failure? In that only the government can really know the market price? Or, just somehow when it comes only to labor the government knows best?

[-] 1 points by Robespierre (89) 8 years ago

Just a demonstration of how little your "putting your money where your mouth is" means.

[-] 1 points by Robespierre (89) 8 years ago

Yeah, $1 is not nearly enough to research even one question.

[-] 1 points by MattLHolck (16833) from San Diego, CA 8 years ago

seriously