October 22, 2009

A friend writes:

I understand the governor of the Bank of England called for breaking up the biggest banks, and for restoring a division between investment banks and savings banks — what the BBC called casino banks and boring banks.
The break-up seemed like financial disarmament to me, but we operated well under Glass-Steagall, didn’t we? What should I know?

My reply:

I was against the repeal at the time, and I still think it’s a bad idea. It should be a function of govermentment to ensure that no institution gets too big too fail.

Bankers routinely pile on to unsound investments. It happens every ten years or so. It’s apparently not a flaw in the system. It is the system. So, allow for it by not letting them get big.

Besides if you’ve ever had to be in the same room with two or three of these bankers, you’d simply want to exile them to some island somewhere and solve the problem that way.

So, Glass-Steagall is lenient by comparison.

On Oct 22, 2009, Tom Major <> wrote:

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