I keep hearing people saying that the Glass-Steagall Act needs to be reinstated to prevent commercial & investment banks from merging because of a conflict of interest that could occur and to prevent speculation that could result in financial problems.
Given the way the banking system is structured, is its re-implementation necessary?
Could it be possible for commercial & investment banks to merge without causing problems?
Ron Paul stated that he voted against repealing Glass-Steagall because the investment banks would now receive FDIC protection leaving them no incentive to be cautious with the money they invest. If it’s insured, why not take as many risks as possible?
What parts of the Glass Steagall act are you talking about? for example Regulation Q was done away with in the 80’s and I don’t hear anyone talking about that. The Glass-Steagall act has been watered down for years so its kind of hard to say what regulations should come back.
Yes, but it really depends on the size of the firm, and wether or not such a merger would create barriers to entry. I think that in an economy dominated by small firms, regulation and anti-trusts wouldn’t be necessary.
I am neither pro-regulation or anti-regulation…Maybe I should think about the issue some more. For now I think that regulation could not possibly lead to more growth, but that I doubt that it could severely hamper the economy.
I’m rather interested in an assessment of the effects the Glass-Steagall Act had during its effect and after its repeal. I’ve known a few people who believe the current recession was born of deregulation to point to its repeal as the culprit. The nebulous domain of regulation makes this hard to disprove without understanding the cause and effect behind the act.