Jewish World Review Aug 6, 2012 / 18 Menachem-Av, 5772
Another convert to the cause
By Paul Greenberg
Mr. Weill showed up in the news the other day to confess his sins, and turn his back on the very policies that let him engineer the largest bank merger in recent American history. Now he's done a 180-degree.
Banks have gotten too big, he says. (Now he tells us.) This after he put together the biggest bank of them all --
Small, he's now discovered, really is beautiful.
In the end, which came as surely as bust follows boom and downfall hubris, Mr. Weill's mega-bank was obliged to take a
Now, with the zeal of the new convert, he's joined the growing choir demanding that investment and commercial banking be separated, so future Sandy Weills can never again imperil the country's -- and the world's -- financial stability.
That's such a good idea
But time passes, memory fades, and the pride and folly of man return. New, cocksure leaders innocent of history arise and explain that such precautions are no longer necessary, and the rules can be safely relaxed -- indeed, abolished. And the old games played again. Let the good times roll!
So the Depression Era law that kept bankers from speculating with their depositors' money was dismantled. It was called Glass-Steagall after its congressional sponsors, whose names had been forgotten over the years. So had their wisdom.
Financial masterminds like
Such warnings could be dismissed easily enough. There was money to be made, or at least gambled away. So a bipartisan coalition did away with the last vestige of Glass-Steagall, which had been crumbling for decades anyway. Why hold on to that remnant of the old order? Who could oppose such a progressive idea? The times weren't just a-changing, they had changed. And the law changed with them. The rush to misjudgment was on.
Even today, there are those who still defend that decision,
But nothing is as simple as it ought to be. Simply resurrecting Glass-Steagall in its original form won't be easy; it may not even be possible. Not after all those who say they're for reviving it in principle find a way to "improve" it in practice -- beyond all recognition.
Consider how the simple old Volcker Rule, which had the same aim as Glass-Steagall, has metamorphosed into the mysterious new Dodd-Frank monstrosity. Its 828 pages of regulations are so vague and complicated, no one can be sure what all it permits or forbids. The myriad of new regulations it authorizes haven't even been written yet.
It has that much in common with Obamacare, aka the Affordable Care Act, which may not prove very affordable or even understandable. Remember when
By all means, restore Glass-Steagall, but, please, not with revisions, exemptions, waivers and other such "improvements." Just re-enact the original. Accept no substitutes. Rebuild the old wall between old-fashioned, commercial banking and high-stakes speculation, And this time let it stand.
Heal the breaches in the old wall -- don't open still more, till it has all the consistency of Swiss cheese, with enough holes in it to drive a good-sized recession, even another Great Recession, right through it. Again.
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