Some have argued that the repeal of the Glass Steagle Act contributed to the current crisis. Since I don’t know much about it I’d thought I’d ask the larger community to get your take on that.
No one I talked to could give me a good cause-effect type argument that even attempted to show how this act could contribute to the crisis.
Every time it was “Look! Deregulation! That must have been what’s caused the crisis!”
One example of deregulation which occurred in the 90s cannot cause complete systemic economic collapse. It’s a completely ad-hoc explanation made by the left wing in order to show that the economy should be fully regulated; the same is true for neo-cons who blame this entire collapse on the community reinvestment act. Economics is a science, it’s complicated, politicians don’t understand this, so they guess and make ridiculous self serving claims. Glass Steagle woudln’t have prevented this mess made by banks (private and central), anyone honest would tell you that.
Glass Steagle has nothing, zero, ziltch, … to do with the current state of affairs in the banking industry. In fact Glass Steagle separate banking and insurance when the companies that had both businesses were much better off before, DURING and after the Depression.
The real cause of this mess and the Depression and all the other recessions has been and continues to be the unsound, unholy, insolvent and destructive combination of central banking and fractional reserve banking.
I was tending to agree that “the Glass Steagle Act contributed to the current crisis”. But why would it be a crisis is the major financial institutions went bankrupt? Anyway, the repeal of the Glass-Steagall allowed the the investment banks to make mistakes that would cause them to gobankrupt. However, what iswrong with that? If a clothing retailer engages in practices that could lead to its bankruptcy, should those practices be banned? If so, why? Where the wrong was committed was not that the Glass-Steagall Act was repealed, instead, what was wrong was the government bailed out those institutions that made the mistakes.