Strength in numbers

Congressional Democrats have put forth proposals that would re-institute restrictions originally enacted during the Great Depression, namely the Glass-Steagall act. The GS act forbade commercial banks and investment banks from merging. Why? To prevent the very crap that we have endured for almost 2 years. The wall between commercial and investment banking was torn down in 1999. At the time I protested and now I am picking up my pom poms that the restrictions are reinstituted. Why?

Investment banks frequently take on enormous risks. Losses there – like investing in mortgage backed securities (the dreaded MBS) – limit the ability of the commercial side of operations from engaging in economically critical activities like lending to big business, small business, and you and me.

Additionally, it is being proposed that financial companies have size restrictions imposed upon them. That way if one should be poorly managed its collapse would not effect the broader economy. Yes, it is being considered that current behemoths might be broken up.

Expect there to be lots of noise from the financial community and from Republicans on this issue. To me the friggin‘ math is fairly obvious. Glass-Steagall in place from 1934 to 1999 (65 years) and no financial-crisis induced recessions. Glass-Steagall repealed in 1999 and two financial-crisis (read: bubble) induced recessions (2000-2001 and 2008-2009). Not having Glass-Steagall in place is like going to a frat house on the last day of college for the year and offering free beer to the fraternity brothers. They get wild and loose and stupid real quick.

Jason