Forum Post: Let's bring back the Glass-Steagall act please
Posted 13 years ago on Oct. 12, 2011, 8:37 p.m. EST by guptara1
(6)
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We need to go back to the times when banks just stick to what banks should do - take deposits and make loans. Leave the risk taking to the private capital shops and the individual investors. Shameful to see how the bankers used public capital to swindle the country. Let's re-instate the Glass-Steagall act and we're well on our way.
Can someone explain to me why it is that a business should be bailed out in the first place? The business failure does not take with it the demand for the goods or services it provided. Will not the next capitalist just step up and fill the void? Will it not be just a bump in the road for the average joe? In reality, does it not just preserve the capital of the one who had more than they required to survive in the first place?
The short answer may be obvious. It’s done to prevent the negative effects of a business failure on the public. The negative effects could show up in different ways depending on the type of business and the circumstances; • When an auto factory shuts down a large number of people can be thrown out of work. • When an investment company fails, a large number of people can lose money or lose access to cash reserves. • The initial effects of a business failure can ripple out and affect a wider population later. • The initial effects of an investment firm failure can bring about a spreading panic that affects the markets worldwide.
A bailout could also be used in certain cases where there is temporary illiquidity in the markets instead of an actual business failure. In this case, the government purchases the assets from the firm that needs to liquidate them, and holds them until the problems in the market are resolved. It could be argued that bailouts provide a valuable function as a cushion against severe economic shocks. It could also be argued that bailouts only delay the negative effects of business failures which show up at a later time.
Would like to see more discussion on this. I'm not as educated about it as I should be.
The key point about Glass-Steagall is that after the Great Depression, Congress decided it was madness to allow retail banks - that is, banks that accept deposits from consumers - to speculate on the stock market, because if the bank lost the money, it was depositor's money they lost, and those depositors (usually) had no idea their money was at risk and being fronted by the banks. So Congress enacted Glass-Steagall, which separated investment banks from retail banks.
In the late 90's, Phill Gramm, may he rest in peace soon, decided there was no risk in allowing banks to risk depositor's money on risky investments. So he pushed across Gramm-Leach-Bliley, which basically said, "it's ok. Retail banks can risk other people's money on risky investments, again."
So, of course, the banks did just that. And they lost vast buckets of their depositors' money in the financial crisis, which forced the federal government to lend the banks money to cover what they lost, basically taking our tax dollars to replace our savings dollars.
This is not an unbiased account. But I maintain that is basically what happened.
Exactly, but we need is a comprehensive strategy, and related candidate, that implements all our demands at the same time, and although I'm all in favor of taking down today's ineffective and inefficient Top 10% Management System of Business & Government, there's only one way to do it – by fighting bankers as bankers ourselves. Consequently, I have posted a 1-page Summary of the Strategic Legal Policies, Organizational Operating Structures, and Tactical Investment Procedures necessary to do this at:
http://getsatisfaction.com/americanselect/topics/on_strategic_legal_policy_organizational_operational_structures_tactical_investment_procedures
Join
http://finance.groups.yahoo.com/group/StrategicInternationalSystems/
if you want to be 1 of 100,000 people needed to support a Presidential Candidate – such as myself – at AmericansElect.org in support of the above bank-focused platform.
Yep.
Reinstate Glass-Steagall now and throw every god damn republican in the country out of office.
What will you do if and when Glass-Steagall is restored and congress bails out Goldman Sachs with tax dollars? What will you do the next time the Fed sends trillions of tax dollars to Europe, inflating the money supply so much that bread is 10 bucks a loaf? Will you be satisfied that investment and commercial banking have been, once again, separated? Will that keep you warm at night the next time AIG gets your money?
In a glass-Steagall regime, if Goldman were to get into trouble for having taken too much risk, the shareholders are the ones who would get wiped out and not any depositors since the bank wouldn't be able to take all those risks if it were a deposit taking institution. So, no need for govt funds for any bailouts. So, in that scenario, the bank's losses won't threaten the system. That threat will keep the bankers from taking reckless risks in the first place.
Goldman got their bailout by pretending to be a (depository) bank, which they aren't and wouldn't have been possible without repeal of the Glass-Steagall firewall.
That's not true. Goldman Sachs, since it's inception, has been an investment bank. It was TOXIC assets that the American people were forced to eat with the bailout.
A transfer (of bad debt from an INVESTMENT bank to the American taxpayer) which would not have been possible without the repeal of Glass-Steagall.
Glass-Steagall will not prevent CONgress from bailing out whoever they want to, and it won't stop the Fed from making loans to Euro banks (thereby inflating our currency). I'm not saying it shouldn't be reinstated (I think it should be) but that's become a simplistic mantra of OWS and it doesn't scratch the surface of what's wrong. Until people understand what the Fed is, they'll never get it.
I cannot argue cogently against your other points except to say Congress can bailout whomever they want even if its Europe (see Marshall Plan). I'm not sure their is anything wrong with that but to do it secretly (for two years) through the Fed is at best distasteful and at worst criminal.
There a Bank Holding company now, which allows them to go to the FED Discount Window.
My point precisely. Glass-Steagall would not have allowed a non depository institution access to those funds.
I just posted this else where, but I thought you might like it. Do you follow Matt Taibbi? I like him and Bill Black.
Matt Taibbi: How Goldman Sachs Takes Your Money: http://www.youtube.com/watch?v=QEhQrnKTQk0
These people took Matt Taibbi's article: "The Great American Bubble Machine" and made it in to video (it is GREAT): http://www.youtube.com/watch?v=QEhQrnKTQk0
Then read the article: "The Great American Bubble Machine": http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405
Next, watch Matt Taibbi Explaining How Wall Street Works (TALF) [8:15]: http://www.youtube.com/watch?v=J9etlLzuMfM
Then read his article "The Real Housewives of Wall Street": http://www.rollingstone.com/politics/news/the-real-housewives-of-wall-street-look-whos-cashing-in-on-the-bailout-20110411
To see a list of Matt Taibbi's videos and articles all in one place go to: http://goldmanbanksters.com/heroes/matt-taibbi/
Bill Black who work on the S&L debacle: http://goldmanbanksters.com/our-thinking/regulators/
Then the government acting as fiduciary for the people owns Goldman, AIG and any other institution similarly situated. They can be reprivatized under the supervision of Brooksley Born and Elizabeth Warren.