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View Diary: Open thread for night owls: Radical deregulation at root of financial crisis (115 comments)

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  •  Wow. You really have a unique viewpoint. (0+ / 0-)

    I'm off to work soon, but Boy Howdy, I have a different viewpoint on Glass Steagall.

    In other words, the thrust was to benefit the "regulated" or "regularized" entity, not the citizenry-at-large.
    The benefit to the banks themselves, IMHO, was that they wouldn't destroy themselves. Stopping them from creating and selling their own securities was certainly not seen as a benefit at the time.  National City Bank (eventually becoming CitiBank) made tons of money selling iffy securitized foreign loans. Their traders and upper management was greed-driven to do so - see the Pecorah investigations.  The Democratic Platform for 1932 talked about protecting depositors from bank failure - not the banks.  I think most people see the FDIC insurance as a benefit to the citizen depositor's (limited amounts, not large investors).

    What guarantees for the banks?  Yes, they wound up getting to do branches up to 20 or 50 miles from the main bank (I forget which), but that's weak tea for stopping all investment banking activity - which BTW, Glass originally wanted an exception for banks to do some securities, but that was shot down.

    I won't even get started on the CRA and how that's held up as being the main cause for the 2008 meltdown.  CPAs at their national conference in 2008 were doing PPTs about the actual makeup of MBSs being sold in 2007. CRAs made up about 4% of the underlying subprimes, and actually brought up the average downpayment (to around 2% - compared to all those 0% down, and negative equity loans).  They especially dug down on one Goldman Sachs offering, tracing all 8200-some mortgages.  

    I'm not in the banking industry, but I have friends who are.  I do not believe they would share your interpretation of Glass Steagall as being a benefit to the large banks when it was passed, rather than a benefit to small depositors.

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