Why Glass-Steagall? Why can't we have "universal banks" which offer all manner of investments, insurance, loans, checking accounts, other payment services, and savings plans all under one roof, or under one board of directors?
Because, the bank doesn't own its deposits. Unlike a department store, where everything on the shelf is owned and paid for by the company that runs the store, deposits are owned and paid for by the depositors! So, to give the bank license to use those deposits in any fashion it chooses is criminal!
Those who object that banks under Glass-Steagall in the U.S. can't "compete" with universal banks in other countries, especially the U.K. and its off-shore money laundromats like the Cayman Islands, are objecting that our banks can't steal as much as career criminals, and are objecting to our government intervening and regulating the market to stop the thieves!
So, what can we permit the bank to do, to make an honest income? What we permit, is what we call our government's credit policy, and to recognize the government's right and duty to establish and enforce a credit policy is what we call having a credit system. Obviously, we want the bank to make the kinds of investments whose gain comes from increasing the size of the pie, not by taking slices from others. Now, some people may not agree with the government's credit policy. Since we value freedom in the U.S. (it's supposed to be an "inalienable right"), we allow people to put their money in "investment banks", or invest it themselves in whatever they please, but under Glass-Steagall, the government will not insure those deposits or those investments.
So, how do we increase the size of the pie? Well, you make cheap credit available for people to develop their skills and acquire better tools, so that their work becomes more efficient and effective. More importantly, you develop the territory, because even the most-skilled and best equipped workers will fail to produce much if placed in the middle of a swamp or a desert with bad or congested roads, no railroads, and inadequate electricity or water.
Now, it is possible to stimulate productive activities by buying stock in a company, or bonds from a company, that does productive things. But because stocks and bonds are traded freely, there is a huge potential for conflict-of-interest when the investor (a bank board) is directing the investment of other people's money (deposits) into stocks and bonds without their explicit authorization! Again, when a bank sells insurance, or underwrites an insurance policy, there is a potential conflict-of-interest when a bank board member is allowed to offer himself or his friend insurance at a reduced rate by dumping the risk on the depositors or on the government agency that insures them.
The conflict-of-interest is not averted by any "ring-fencing" scheme, whereby the same board of directors is allowed to direct insurance and stock-brokerage activities and also commercial banking with insured deposits, while maintaining separate books for both. As long as there is a common board of directors, there is a strong motivation for favoritism in loan offers and for conspiracy to cover-up abuses, even to cover-up cooking the books. The reason "ring-fencing" schemes are being so feverishly promoted is precisely because they are unenforceable in any society of less-than-saintly people!
So, under G-S, the only kind of investment the bank is allowed to make is a totally non-trade-able (i.e., not convertible into a security, such as a mortgage-backed security) LOAN, for the purpose of buying or building something that is actual wealth (e.g., a house, an education, a machine) rather than something that might be traded for wealth. The only exception is where a special government agency assists banks to make loans to borrowers that the government considers qualified, through an agency such as Fannie Mae. Such a restriction prevents banks from using depositors' money to create market bubbles, whereby the bank makes an apparent profit on its investments, whose market value keeps going up and up, but at the expense of the economy as a whole, and setting the stage for a collapse, when the bank may then blackmail the government into giving it a bailout, or worse, into tolerating a bail-in, or Cyprus-style looting of deposits, or a swindle such as the sale of "preferentes" in Spain and their subsequent conversion to worthless common stock in a failed bank.
The consequences of tolerating looting on the scale that the repeal of Glass-steagall has made possible are genocidal: shutdown of public health infrastructure, general neglect of infrastructure, budget sequestration and severe downgrades of life-preserving government services, and killer unemployment! Genocide! Is it clear now, why we need a JIHAD for Glass-Steagall??!! Are you ready to fight with religious zeal? Visit larouchepac.com