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Politics : Politics for Pros- moderated

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To: LindyBill who wrote (344806)	1/21/2010 6:14:52 PM
From: nrg_crisis	Read Replies (1) of 793910

President Obama has outlined a new banking proposal: >> The White House wants commercial banks that take deposits from customers to be barred from investing on behalf of the bank itself — what's known as proprietary trading — and said the administration will seek new limits on the size and concentration of financial institutions.<<< The first, and core, concept of the proposal is the re-segregation of commercial banking from proprietary trading (or roughly what used to be called commercial banking from investment banking). This is an excellent proposal. If you want to have a safe, secure banking system for small depositors, but don't want to make risky investing illegal (which would be very damaging to the economy), the obvious solution is to not allow any one company to both take guaranteed deposits and also make speculative investments. This was the solution developed and implemented in the New Deal. We need a modernized version of this basic construct, and as far as I can see, this is what President Obama has proposed. Right. The New Deal solution was the Glass-Steagall Act en.wikipedia.org which made investment banking and commercial (deposit-based) banking separate enterprises - the same firm couldn't do both. Glass-Steagall was repealed in 1999. I am firmly of the opinion that the financial mess of the past few years was enabled by the repeal of Glass-Steagall. Obama's announcement today went partway back toward Glass-Steagall, but not very far. He proposed that commercial banking institutions not be allowed to have their own hedge funds or private-investment arms. But that still leaves a lot of room for commercial banks to run investment divisions and get themselves in trouble in the same way again. I would think that the current environment with voter anger toward fat Wall Street bonuses would be an opportune time to re-institute Glass-Steagall. Why not just do that? And, btw, Obama's tone toward banks that he predicted during his announcement "will fight" him was waaaaaaaay tougher and more resolute than anything I've seen or heard from him toward, say, Iran or Venezuela or Hamas. Guess he still thinks he's 'speaking truth to power'. Puh-leeze. Nick

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