Monthly Archives: April 2012

Quotes About Glass-Steagall

Quotes About Glass-Steagall - Luigi Zingales

The beauty of Glass-Steagall, after all, was its simplicity: banks should not gamble with government-insured money. Even a six-year-old can understand that, which is why former chairman Paul Volcker endorsed the principle in 2009. But then the Obama administration transformed the so-called Volcker Rule into 298 pages of mumbo jumbo. Why? Well, as an economist, I have been trained to infer intentions from outcomes, especially when I’m considering smart and experienced people. So it seems a reasonably safe bet that the Obama administration endorsed the Volcker Rule, rather than Glass-Steagall, because it knew that the Volcker rule was almost as popular but, unlike Glass-Steagall, required so many details to be implemented that it would never be enforced. In this way, the Obama administration could avoid displeasing the banking industry and get political consensus to boot.

Luigi Zingales A Capitalism for the People

Quotes About Glass-Steagall - Brooksley Born

Brooksley Born, a Wall Street regulator in the late 1990s who correctly warned that deregulating derivatives would cause a financial disaster, spoke out again about Wall Street in a panel in Washington. She said that “too big to fail is the primary problem” and that “the Glass-Steagall Act, before it began to be eroded by the bank regulators, was a good idea.”

Born also called for a break up of the big banks, saying that there are many good ideas about how to proceed with the effort, and that we should move forward on that front.

This is good news for our cause, since Born’s reputation as a clear thinker has deservedly been heightened in recent years. Ever since the financial crisis we’ve witnessed the aftermath of ignoring her warnings in the late 1990s (warnings which were scoffed at by bozos like Larry Summers and Robert Rubin). Born is someone who deserves to be listened to, and we ignore her at our own peril.

Quotes About Glass-Steagall - John Dingell

The repeal of Glass-Steagall certainly wasn’t the sole cause of the 2007-08 financial crisis, but it was a factor since it increased concentration in the biggest banks, leading to more powerful lobbying power, and since it created a sudden sharp rise in competition from commercial banks, pressuring smaller investment banks like Bear Stearns and Lehman Brothers to quickly increase their leverage to stay competitive.

What’s impressive about this speech from 1999 is how Congressman Dingell’s warnings proved to be true. We certainly have banks that are too big to fail, and we’ve had to bail them out. Unless we reverse course somehow we will likely experience bailouts again in the future.

Quotes About Glass-Steagall - Byron Dorgan

Also see Byron Dorgan’s warning from 1999:

“I think we will look back in 10 years’ time and say we should not have done this, but we did because we forgot the lessons of the past, and that that which is true in the 1930s is true in 2010″.


This video contains more quotes on the topic:

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