Explain how repealing conflict of interest restraints "against simultaneous service by any officer, director, or employee of a securities firm as an officer, director or employee of any member bank" qualifies as a "narrow measure."
Would you say Alan Greenspan endorsed "narrow measures" of deregulation?
"Early in his (Greenspan"s) tenure, the Federal Reserve reinterpreted Glass-Steagall
to allow banks to deal in certain debt and equity securities, so long as it did not exceed the 10
percent limit rule.
"Later, in 1996, the Federal Reserve issued an audacious ruling, allowing bank
holding companies to own investment banking operations that accounted for as much as 25 percent
of their revenues.
"The decision rendered Glass-Steagall effectively obsolete, since virtually any
institution would be able to stay within the 25 percent level.19.
http://www.openthegovernment.org/sites/default/files/otg/dereg-timeline-2009-07.pdf
Katherine Mangu-Ward said:
The Glass-Steagall Act of 1933 prohibited investment banks from acting as commercial banks, and vice versa. Signed by Bill Clinton (who continues to defend the legislation), the Gramm-Leach-Bliley Act of 1999 repealed those aspects of the law. Many on the left blame at least part of our current woes on that move. With the repeal, Barack Obama said in a March economic address, we have deregulated the financial services sector, and we face another crisis.
In fact, multiple exemptions to Glass-Steagall had been granted for years before Gramm-Leach-Bliley was signed into law. Most European financial markets, not normally known as more deregulated than the U.S., never separated commercial and investment banks in the first place. And there is no correspondence between institutions that benefited from the repeal and those that recently collapsed. Institutions that didnt take advantage of the Glass-Steagall repeal, such as Lehman Brothers and Bear Stearns, were the ones that failed most spectacularly, in part because they lacked the stability provided by commercial banking deposits.
If anything, Gramm-Leach-Bliley may have softened the blow. The George Mason economist Tyler Cowen argues that Gramm-Leach-Bliley made way for more diversity in the financial sector, and so far in the crisis times the diversification has done considerably more good than harm. Under the Glass-Steagall rules, Bank of America and J.P. Morgan Chase would not have been able to acquire Merrill Lynch and Bear Stearns. Nor would Goldman Sachs and Citibank have their current unified form, which may have helped them survive.
There is a significant body of academic work supporting this idea. The Rutgers economist Eugene Nelson White, for example, has found that national banks with security affiliatesthe sort of institutions Glass-Steagall was designed to preventwere much less likely to fail than banks without affiliates.
Source. Emphasis mine.
"In the late 1990s, the fight over these and other exotic new derivatives pitted a committed regulator named Brooksley E. Born, head of the Commodity Futures Trading Commission, against the powerhouse triumvirate of Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert E. Rubin, and Securities and Exchange Commission Chairman Arthur Levitt Jr.
"Unsurprisingly, Greenspan, Rubin, and Levitt won. The result was the Commodity Futures Modernization Act of 2000, which gave the SEC only limited anti-fraud oversight of swaps and otherwise
relied on industry self-regulation.
"The Washington Post has closely chronicled the clash, concluding that 'derivatives did not trigger what has erupted into the biggest economic crisis since the Great Depression. But their proliferation, and the uncertainty about their real values, accelerated the recent collapses of the nations venerable investment houses and magnified the panic that has since crippled the global financial system.'
"In other words: The absence of a regulation didnt cause the crisis, but it may have exacerbated it."
Is Deregulation to Blame? - Reason Magazine
In some other words if government as it's existed for the last 5000 years isn't sufficiently competent to regulate Wall Street and Wall Street lacks the integrity for self-regulation, is it time for a wall of separation between private wealth and the state?
Joseph Stiglitz makes the point that Glass-Steagall worked well during that quarter-century after WWII when there was almost no financial or banking crises and a period of rapid economic growth combined with a reducing of the inequalities in US society.
Interviews - Joseph Stiglitz | The Warning | FRONTLINE | PBS
